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Feb
9
The investment in Posera is a reminder to buy small cap stocks with a margin of safety
Posted by: Gerry Wimmer
2/9/2020
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TOP IDEAS: Takeover of Posera Ltd. offers little to gain but, thankfully, no losses due to lack of leadership at the Company and execution.




Investorfile’s share price accumulation target of $0.25 for Posera Ltd. was reached on October 23, 2017. For the record, we do not revise share price targets for our Investorfile Top Ideas – Small Cap Value Stocks. We have positioned our blog to be one of the first providers of a pragmatic perspective of a small cap company stock's potential worth, where there may be uncovered value that has been largely overlooked by the investment community.


At Investorfile, the mandate for our blog is to provide investors uncompromising views and strategic insight on small and micro cap investments. But we also provide blog commentary for the small cap investor while not pulling any punches about the good, the bad and, sometime, ugly practices in the small cap stocks that can impact share value.

Prior to its recent takeover, Posera Ltd. was one Investorfile’s Top Ideas. This Company’s products and services facilitate all aspects of the payment transaction between the merchant and the consumer. Posera’s Point-of-Sale (POS) Systems software solutions, associated enterprise management tools and debit/credit payment terminals had been deployed in 25 countries in over 30,000 merchant locations worldwide.

One of the biggest growth catalysts for Posera’s POS was its SecureTablePay application, which enabled safe, secure and stable "Pay-at-Table” capabilities for the US hospitality marketplace.

Unfortunately, despite the promise at Posera Ltd., in our opinion, there was poor execution by Management to seize the market opportunities. With that, the members of the Board of Directors for this Company during our coverage period, demonstrated inadequate leadership and judgement on the approval of major decisions that ultimately negatively impacted share value. While Investorfile could get specific on details and on who and what led to the disappointing return on this small cap investment, for this blog post we choose not to.

Instead, the Investorfile blog is thankful that from its initial recommendation of Posera Ltd at C$0.11 (See: Posera shares offer investors both value and big upside potential), no losses were incurred as a result of the takeover of the Company by PayFacto Payments Inc. for a final value estimated somewhere between C$0.12-$0.15 per Posera share. In fact, to be fair, since our recommendation date, the Company’s stock price did trade as high as C$0.34, up over 200% in value during a period of very heavy trading volumes. This provided ample liquidity and upside for opportunistic investors at the time.

But the moral of this blog post is to remind investors that small cap stocks are almost never perfect investments. There can be many unexpected reasons (both market- and company-specific) that can have a dramatic impact on a small cap stock price. To this point, investors who buy a small cap stock based on its trading momentum and ignore the market valuation of the stock that they buy can find themselves with heavy losses when things do not turn out as planned.

At Investorfile we did see a growth investment opportunity by recommending the shares of Posera at the time. The key is that we also pay close attention to market valuation when initiating a position in a small/microcap stock to provide a margin of safety should things not work out as planned, like in Posera’s case. In saying that, at the end of the day, this investment led to small gains instead of big losses.

Posera Ltd. is the ninth stock from our current list of 20 Top Ideas that has been subject to a takeover or privatization.


Read Disclaimer:

This article is for informational purposes only. This article is based on the author's independent analysis and judgment and does not guarantee the information's accuracy or completeness. The information contained in this article is subject to change without notice, and the author assumes no responsibility to update the information contained in this article. The information contained within this article should not be construed as offering of investment advice. Those seeking direct investment advice, should consult a qualified, registered, investment professional. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock.

Investorfile.com is not engaged in an investor relations agreement with Posera Ltd. nor has it received any compensation from Posera Ltd. the preparation or distribution of this article.

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Hi Gerry, Your philosophy is focused on principles that have been shown to produce above average results over time and your record has clearly proven that. Congratulations on a great blog and thank you for the hard work that you do in sharing and updating your ideas; it is much appreciated.