Spenda Limited (ASX:SPX) has signed a binding term sheet with Capricorn Society Limited for a 10-year service agreement set to revolutionise payments infrastructure and unlock substantial potential in the automotive industry.
10-Year Service Agreement
Spenda has entered into a significant 10-year service agreement with Capricorn, to provide software and ecommerce payments infrastructure.
Before embarking on this agreement, the Company must complete its Digital Services Delivery (DSD) initiative foundation stage, anticipated to be achieved by the end of the year.
The DSD initiative is a strategic project aimed at enhancing payments infrastructure for Capricorn’s Members and preferred suppliers, ultimately increasing productivity and efficiency.
Spenda is set to benefit substantially from this partnership. Upon the successful completion of the foundation stage, Spenda will receive $443,000.
Additionally, the Company will receive $1.3 million in initial development fees, with commercial launch expected in 2024. Further bolstering Spenda’s finances, there is a minimum recurring revenue of $100,000 per month in software licensing fees, which will scale over the course of the 10-year agreement.
Cornerstone Investment Terms Agreed
Capricorn has the potential to subscribe for up to 412 million shares in Spenda, representing up to 9.97 percent of Spenda’s share capital post-investment.
This subscription will occur via a private placement at $0.0175 per share, constituting a 77 percent premium to the 30-day Volume-Weighted Average Price (VWAP) of $0.0099.
However, this investment is contingent upon several conditions, including the successful completion of the foundation stage of the DSD initiative, Capricorn’s due diligence, and approval from both companies’ boards.
The Market Opportunity
One of the most exciting aspects of this partnership is the potential market opportunity for Spenda, with Capricorn boasting a vast network of over 26,000 Members and 2,000 Preferred Suppliers.
This network generates a staggering $270 million per month in parts purchases from the approved Supplier network. As a result, Spenda’s role in enhancing Capricorn’s payments infrastructure positions the Company to tap into a significant share of this market.
Road to Transformation
The road to transformation commenced when Spenda was selected as Capricorn’s preferred supplier for the first phase of the DSD initiative (Foundation Stage) in May 2023.
This phase was successfully completed by the end of August 2023, leading to negotiations for an extended foundational phase engagement.
The final phase of the DSD initiative involves a Proof of Concept (PoC), which will simulate the entire production solution, complete with the creation of a mock Supplier eCommerce site. This PoC is crucial for de-risking the solution implementation and will offer valuable design insights for the subsequent build phase.
A Positive Outlook
This transformative partnership serves as a clear indicator of the substantial strides the Company has taken in broadening its product portfolio and expanding its market footprint, exemplified by its recent venture into the agricultural sector through a binding agreement with AgriChain Pty Ltd, officially disclosed just yesterday.
The leadership teams of both Spenda and Capricorn have expressed their enthusiasm and optimism about this strategic agreement.
Capricorn’s Chief Executive Officer (Automotive) Bradley Gannon expressed excitement about the Project’s potential to bring significant value to Capricorn’s Members and Preferred Suppliers.
“Capricorn is delighted to enter into the agreement with Spenda to continue our long and valued relationship,” he said.
“The development of the DSD project and entry into e-commerce will bring significant value to our Members and facilitate the relationship with our Preferred Suppliers. This project represents a significant step in how we engage with our Members and Preferred Suppliers and we look forward to working closely with Spenda to ensure the successful delivery of the Project.”
Spenda’s Chief Executive Officer and Managing Director Adrian Floate expressed his perspective on the partnership, viewing it as a significant opportunity that opens the door to heightened e-commerce activity on their payments infrastructure.
“The signing of this binding term sheet with Capricorn represents a transformational commercial opportunity for Spenda,” he said.
“Over the past five months, we have been working closely with the Capricorn team to deliver a payments solution to enable all Capricorn Members to access eCommerce payment solutions that are powered by Spenda. We are in the final phase of the Foundations Stage of the DSD project and on track for commercial launch in early 2024.”
“The terms sheet provides both parties with clarity on the long-term commercial terms including the opportunity for a possible cornerstone investment. This represents a significant partnership for both Spenda and Capricorn that lays the foundation for long-term growth for both parties over time. Spenda’s potential to benefit from increased ecommerce volumes on this payments infrastructure, through Capricorn’s 26,000 Members and 2,000 preferred suppliers, is significant.”
SPX’s Australian Stock Exchange-listed share price has risen 15.4% today and is currently trading at $0.015 (10:30am UTC+ 8 hours).