Supply Chain Finance – Tungsten / OB10, Gearing up to be Major Player

The third and final of this week’s Supply Chain Finance updates, focusing on UK-based firms we’ve talked to recently, is Tungsten / OB 10.  OB10 is a well established, market-leading e-invoicing firm, but was acquired via the flotation of Tungsten, a new AIM quoted firm, late last year.

Another key element of that transaction was that Tungsten was intending to acquire a bank, which would then provide the financing to sit alongside the OB10 e-Invoicing capability, and form a new force in supply chain finance (SCF). However, getting the bank – or at least the banking licence sorted out - has taken longer than expected.

That delay caused some disappointment in the market in recent weeks. The Tungsten shares, issued at 220p last November, went up to over 300p earlier in 2014 but fell back and last week actually dropped below issue price. At that point Ed Truell, the CEO and City legend, stepped in as a buyer, and perhaps because of his confidence, the price recovered to around 240p. And it looks like things are on track now on the banking side – a recent announcement said this:

“Further to our announcement last week, the UK's Prudential Regulation Authority has accepted as complete the formal change of control request to finalise the acquisition of FIBI Bank (UK) Plc (the "Bank") and has initiated the formal 60 business day period for assessment and approval.  The Board remains hopeful of having the required approval to commence the Bank's operations by the end of May 2014.” 

We’ve also seen some senior management changes, and some significant hires, such as Rick Hurwitz to lead Tungsten’s efforts in the US, whilst the key players from OB10 (like Luke McKeever, who is still CEO of OB10) are, in the main, still in place. And at Tungsten Board level, there are some super-big hitters, such as Michael Spencer as a non-exec and Ed Truell himself as Group CEO.

All good, but there are some remaining questions. The branding strategy is not particularly clear, although that is probably not a big deal for a B2B firm. (It’s not exactly like Mars changing the name of Snickers to Marathon, is it)? But it is fair to say that I’ve been a little surprised by the lack of apparent pace in establishing the new Tungsten concept in the marketplace. For instance, the OB10 website does not give any obvious link through to the Tungsten website, although Tungsten is mentioned as the parent company. The Tungsten website is very dull too, clearly not aimed at potential customers.

The major competitive advantage for Tungsten, apart from the credibility of the management team and the financial strength a stock market quote gives them, is the large installed customer base on the e-invoicing side, which includes some of the largest and best known businesses in the world.  Getting a reasonable proportion of those clients signed up to a SCF programme would be enough in itself to make Tungsten a success.

However, its very size and legacy does of course also bring issues. Might some of the smaller but perhaps more nimble operators (see our previous articles in this short series) offer a serious threat to Tungsten?  We’ll see, but that existing position in the market gives it an excellent chance of becoming major SCF players as well as continuing in its position as e-invoicing leaders.

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