Getswift: The gift that keeps on giving

There was a pearler of an announcement from the Getswift (ASX: GSW) this morning. I paraphrase:

  • The share price didn’t move after we first announced the contract, therefore our Fruit Box contract was not material
  • When Fruit Box was cancelled, we hadn’t completely finalised our contract with Commbank, but we were sure hoping to, because if we did, then we wouldn’t have to report the loss of Fruit Box 
  • We signed the contract with Commbank shortly after and, given that it would take 12+ months to show revenues, this very large and so far non-contributing contract definitely means that Fruit Box is immaterial


ASX: ‘Has Commbank agreed to use the Getswift software?’ 

  • We see no reason why they wouldn’t
  • Because we see no reason why they wouldn’t, this means that we, unfortunately, don’t have to respond to your request that we justify our statements “revenue will commence in mid-2018” and that we will get “257,400,000 deliveries”. Sorry about that!


ASX: ‘You’re suspended.’

There is an issue of credibility when these things happen. Getswift could have, narratively, been a new company, understaffed, run off their feet, bit too optimistic in the forecasts – whatever – and got caught up in some problems with the ASX.  Now they realise “hang on, we’re in trouble here” and they take a step back, make extensive disclosures, share price does whatever, and Getswift lifts its game from here.

In my view, that was most definitely not the case with today’s announcement. Getswift ducked all the substantive issues and gave an unconventional explanation to justify why its contracts were not material. Share price movements are far from the only test of materiality.

Just because the share price didn’t rise on news of winning the contract, that does not mean that it would not fall on news of losing it so soon after. I think this is a strange argument because Getswift didn’t disclose the loss at the time, so there is no way to know if shares would have moved, and thus no way to determine the materiality of the announcement based on share price movements – which is the criteria Getswift used to judge materiality! As a result I don’t think the company can argue it was not material based on the share price alone.

I believe that the Fruit Box contract was almost certainly material in the context of the ASX’s continuous disclosure rules and I showed why in this post.

Then there was this:

A contract, or a contract?

“Regardless of any POC period, because the contracts are pay as you go; clients that no longer want to use the platform simply cease using it and this is then reflected in our periodic reporting of delivery transactions and revenue.”

What is the point of calling it a contract? Sure, there is an agreement on fees and payment terms. However this looks like a pretty soft contract that doesn’t reflect the locked-in revenues that the market has been assuming for Getswift. Getswift has been implying that there are locked in revenues and switching costs by forecasting a full 5 years’ worth of deliveries, even though their customers can stop at any time.

If you look at the prospectus there is another questionable bit relating to these ‘contracts’:

“Discounts are applied to larger clients using a tiered fee structure, based on the client’s monthly transactional volume and the length of contract commitment.” 

Why offer a discount for a longer contract if your client can quit at any time?  In my view this does not make a lot of business sense. Volume discounts, sure. But why offer a discount for length of commitment if your client is not bound by that commitment?  You are literally giving money away for free to any shyster who knows how to negotiate.

Getswift has forecast hundreds of millions of transactions from deals that apparently

a) won’t earn revenue for ~12+ months (Commbank) and,

b) have no switching costs and that,

c) clients can quit at any time.

How much hubris do you need to have to go out there and say that our new software solution with no switching costs, no exit fees, and currently in a pre-pilot phase will, fo shizzle, “result in over 257,400,000 deliveries on its platform over the next five years, with an estimated aggregate transaction value of $9 billion.”

What a fucking shambles.

Getswift earns 10foot’s highest accolade:

Speaks for itself, really.

I have no position in any company mentioned. This is a disclosure and not a recommendation.

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