Did you notice the correction in the Russell 2000 stock index over the past month? (A correction is arbitrarily defined as a drop of 10% or more from a stock market index’s high point.)
The correction in the public procure-to-pay and order-to-cash company stocks is even deeper and longer. In the chart below, the top black line is the stock price of the Russell 2000 index over the past year. The other lines represent the stock prices of public small and mid-cap players in the procure-to-pay or order-to-cash market, domestically and in Europe.
Procure-to-Pay Valuations Simmer Down Now
Over the past year, the Russell 2000 index is up about 14%. (Since its peak on November 8, 2021, however, the index is down more than 10%, hence the correction.)
For the year ended Friday, most of the public procure-to-pay stocks are down significantly more:
- Coupa (COUP): -44%
- AvidXchange (AVDX): -28% (since going public)
- Billtrust (BTRS): -51%
- MDF Commerce: -45%
- Basware: -19%
- Mercell: -40%
- Rosslyn Data: -33%
- Bottomline Technologies (EPAY) (not on the graph): -6%
- Cass Information Systems (CASS): -2%
- Tungsten: +12%
- Sidetrade (not on the graph): +41%
About The “Better” Performers
Tungsten, one of two stocks among this group with a positive return over the past year, was in negative territory until very recently. In the past couple of weeks, there was a flurry of hedge fund activity in Tungsten’s stock (some of it out of Seattle, Washington). This activity was swiftly followed by an announcement that Amazon Business had chosen Tungsten for an e-invoicing relationship. (Hmm. That’s a bit curious.)
Hedge funds have also invested in, and taken board seats, in Bottomline Technologies (EPAY). Bottomline, as I have written previously, offers legal spend management and Paymode-X.
Cass Information Systems (CASS), the Rodney Dangerfield of B2B payments companies, has a stock that does not move much. CASS pays a dividend of 2.7%, so it has a bit of a downside cushion. (Full disclosure: CASS is the only one of these stocks I own. I could not resist a good dividend yield over these past few years.)
Sidetrade is an order-to-cash company based in France but expanding into the US. The company is very interesting because it has a solution for sales order management, which some of the other players in the space do not. Sidetrade is quite small, but is profitable. How unusual!
We can spend days arguing about whether these stocks were overvalued a year ago, but clearly, hedge fund investors think a few are now oversold. If I knew the answer, I would not be writing this blog!
NB: On 12/14, Tungsten, which had had a lot of hedge fund activity recently, announced that Kofax had made an offer of 40p per share for the company and that both Jaggaer and Accel-KKR were also in discussions with the company.
Another Update: On 12/17, Bottomline Technologies announced plans for a go-private transaction with Thoma Bravo for $2.6 billion or $57 per share. The stock was trading in the low $40s before all th hedge fund action started to be reported.