iSignthis takes National Stock Exchange stake

Embattled fintech iSignthis has picked up a piece of the National Stock Exchange with an eye to launching an ASX competitor.

John Karantzis.

ISignthis boss John Karantzis is gearing up to give the ASX a run for its money after the embattled fintech picked up a 19 per cent stake in the National Stock Exchange.

Mr Karantzis said the deal was another step forward in ISignthis’ plan to break the stranglehold of the ASX’s Austraclear clearance and settlement facility.

“We have seen the likes of Chi-X complain about the Austraclear monopoly, which leaves them with no viable alternative to compete in the market, so hopefully we can shake all of that up.”

“The Australian Securities and Investments Commission (ASIC) is aware of the deal and the competitive elements of this deal.”

“We have had our regulatory submissions in since February last year, it’s been no secret to tell regulators that we fully intended to be a wholesale payments network that supports brokers and eventually market operators,” he said.

iSignthis, once valued at over a billion dollars, offers payments and identity verification services and has had its shares suspended for five months as the ASX reviews its disclosures policy governance and shareholder structure. The shares last traded at $1.07 each.

The NSX operates Australia’s secondary listings market operator with more than 65 companies on its boards. Mr Karantzis said the NSX tie-up was fully funded by ISignthis’ cash reserves.

Under the terms of the agreement, ISignthis will pick up a 12.96 per cent stake in the NSX for $4.2m at 14.5 cents a share. The NSX is also looking to raise between $3.8m and $5.8m, of which ISignthis has the option to subscribe to an additional amount, taking its shareholding in the NSX to 19.9 per cent.

NSX shares jumped over 120 per cent on the news ending the session on Thursday at 20 cents. ASX shares slipped 1.3 per cent to $81.47.

ISignthis is also forming a clearance and settlement joint venture, dubbed ClearPay, with the NSX. The agreement will see NSX invest $3.2m for a 41 per cent stake in ClearPay, with ISignthis holding an initial 59 per cent interest.

The platform is underpinned by distributed ledger technology, with ISignthis’ subsidiary, Probanx Solutions, leading the development work.

ClearPay, which will offer multi-currency, real-time and same day clearing of trades, intends to go head-to-head against the ASX’s planned platform that will eventually replace its Clearing House Electronic Subregister System, better known as CHESS.

“We have more than 17m in the bank so our cash reserves are more than adequate to fund the deal, also the $4.2m we are putting into the NSX will go towards funding ClearPay,which will pay fees back to ISignthis for developing the platform.”

“So the money does come back in a way and we end up with a stake in both the NSX and Clearpay,” he said.

The investment by ISignthis comes as the fintech locks horn with the ASX in federal court over allegations that the market operators had leaked confidential information about the company’s operations.

The issues first hit the headlines in September after a damning report from proxy advisers Ownership Matters.

Mr Karantzis is confident that ISignthis shares will be reinstated, adding that the ASX’s scrutiny has gone well beyond normal parameters.

“What we find curious about the suspensions is the ASX’s focus on our capabilities and trading platforms, we put our regulatory submissions to compete with Austraclear to the RBA, ASIC and APRA around February/March last year and at some stage it woud appear that part of these submissions were leaked.”

“I just think its crass of the ASX to focus so much on our abilities and know how, that’s what we have objected to.” he said.

He added that ISignthis was on firm footing, irrespective of the outcome of its scrap with the ASX.

“We have had preliminary discussions with a number of exchanges around the world, the question really is have we outgrown the ASX or should we go somewhere else, given that 90 per cent of our revenue is coming from Europe.”

ISignthis’ announcement on Thursday comes a day ahead of the ASX launching Australia’s own version of the Nasdaq, with the S&P/ASX All Technology Index, capitalised at around $102b, to offer investors a chance to track the performance of listed technology companies, big and small.

The new index will have a broader scope than the S&P/ASX 200 Information Technology Index, which lists the top 200 IT companies.

“What’s ironic here is that we will be part of that index even though were are suspended,it’s funny that way,” Mr Karantzis said.

“We see this as a blip, the company is growing, its profitable and where we end up being listed doesn’t bother us.”