BikeExchange’s stock market descent is picking up pace
BikeExchange's (ASX:BEX) stock market descent is picking up pace
BikeExchange (BEX) – the naming rights sponsor of the Australian-registered Team BikeExchange-Jayco – has not had an easy time of it lately.
The cycling-focused online marketplace, founded in 2007, was once considered an Australian tech success story, offering bike shops and individuals a listing platform. The company’s offering diversified over the years into editorial – indeed, from 2016 to 2019, CyclingTips sat under the BikeExchange umbrella (prior to joining PinkBike, and later Outside Inc in 2021).
An ambitious growth strategy saw BikeExchange open subsidiaries in different markets, including the USA, Colombia, Germany and the UK. BikeExchange’s platform was also the catalyst for a broader network of online marketplaces, with its infrastructure rolled into a series of other verticals – most prominently Marketplacer.
Since listing on the Australian Securities Exchange in February 2021, BikeExchange was hoping to convert that buzz into shareholder returns. Nearly 77 million shares were issued at 26 cents each – many of them snapped up by major stakeholders in the business.
That was as high as the share price would go. In the last year, the share price has peaked at 25c but since June 2021 it has been on a near-alpine descent. Yesterday it was trading at 3.5 cents.
Public documents paint an equally worrying picture. Three announcements this morning – all issued in a 40-minute flurry – revealed that:
- 8.44 AM: A complaint had been filed against BikeExchange subsidiary Kitzuma Corp for infringement of the intellectual property of another bike delivery service, TriBike Transport [BikeExchange says that it will “vigorously defend against the complaint” and that “the business remains unaffected”]
- 8.49 AM: A notice that BikeExchange’s Global CEO, Mark Watkin, had resigned, effective immediately. [Watkin will be replaced on a temporary capacity by BikeExchange co-founder Sam Salter]
- 9.24 AM: A trading halt was announced “pending the expected release of an announcement related to a proposed material equity raise.”
A clue as to the existential necessity of that equity raise can be found in the company’s most recent quarterly activity report, issued April 29, 2022. That document reveals that the company’s cash reserves had dropped by almost AU$8.5 million in the nine months of the financial year to date, with remaining funding available for just one quarter. That is, unless something changes, the company will be running on empty by the middle of this year.
The BikeExchange brand, meanwhile, remains a prominent part of the men’s and women’s WorldTour pelotons, with the BikeExchange-Jayco squads currently competing in their 11th consecutive season.
Those cycling teams have long been funded by Gerry Ryan, an Australian multimillionaire with extensive sporting and business interests. CyclingTips understands that BikeExchange – which is part owned by the Ryan family – was not itself financially contributing to the team; rather, its name on the kit was a brand-awareness tool for a Ryan family investment, similar to how various iterations of the team have been ‘sponsored’ by businesses such as Mitchelton Wines and Jayco Caravans.
With the runway running out for the BikeExchange company, the future of the cycling team bearing its name is, counterintuitively, not directly threatened. However, with lacklustre recent results, there may be a more visceral threat awaiting: the men’s WorldTour team is hovering in the relegation zone and risking demotion to the ProTeam ranks.
And with brand equity being the driving force behind sponsorship – no matter how benevolent the cheque writer is – that could change the dynamic again … for BikeExchange and Team BikeExchange alike.
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