Summary
It was only 8 months ago that Ted Leonsis said that the post-money valuation of Revolution Money is less than $200 million (WSJ April 6, 2009). As I remember thinking that number was wildly inflated at the time I was truly shocked to read about $300 Million purchase price.
Analysis
This is a coup for Revolution Money (WSJ April 6 2009, “Case is the largest shareholder, followed by CitiGroup and Leonsis, respectively. Leonsis said the post-money valuation of Revolution Money is less than $200 million”.) Revolution has been struggling with the classic chicken and egg problem in building a new payments network - how do you get merchants to accept a product that few have? Although the value proposition of being a low cost credit card network sounds appealing, merchants are loathe to change. My view was that the "Revolution" never really started.
What was Amex thinking? My take on this acquisition is that the investment thesis is all about bringing some new energy into Amex’s GNS pitch to banks. I think it is just marketing and I do not see Revolution's product set or “network” really adding anything remarkable. $300 million seems like a very healthy price to pay for sizzle.
What was Amex thinking? My take on this acquisition is that the investment thesis is all about bringing some new energy into Amex’s GNS pitch to banks. I think it is just marketing and I do not see Revolution's product set or “network” really adding anything remarkable. $300 million seems like a very healthy price to pay for sizzle.
Analyses are solely the work of the authors and have not been edited or endorsed by GLG.
