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Payment systems the future for Blue Star Capital

Blue Star is now a payments solutions investor - blockchain and biometrics
SatoshiPay's micropayments use the blockchain for rapid transactions

Early stage investment companies can be tricky things for investors as their portfolios are usually illiquid, which makes them hard to value.

Blue Star Capital PLC (LON:BLU) is an AIM-listed investor with stakes in two promising technology start-ups.

WATCH: Blue Star Capital reports big rise in NAV as SatoshiPay platform takes off

In its case, though, recent funding rounds have put a clear value on the businesses.

Both companies - SatoshiPay and Sthaler - are focused on secure electronic payments.

Germany-based SatoshiPay has developed a blockchain-based micro-payment system that is currently being piloted by publisher Axel Springer, one of Europe’s largest publishing houses.

Through an e-wallet, payments can be made directly to Axel without the need for an intermediary, with transactions logged by the blockchain.

Blockchain-based micropayments

Meinhard Benn, SatoshiPay’s founder and CEO says the key attractions are the cost, which is less than 1p per transaction, and speed, with each payment taking less than five seconds.

Such is the versatility of the platform, it can split payments between various contributors – author, editor or in any way Springer wants.

The e-wallet is denominated in eurotokens and uses the Stellar open payment platform.

Readers get a prompt when they come across a piece of paid-for content and just hit proceed for the payment to be seamlessly carried out.

Global payments, too, are straightforward through the e-wallet, with people accessing content in South America able to pay someone in Asia as easily as someone in the next room.

SatoshiPay also has pilots underway with business newspaper City AM and widely followed tech website, the Register.

Börsenmedien, a supplier of finance information to German speakers and a 5% shareholder in SatoshiPay, has also agreed to use the system for its news sites.

£100mln potential

“It’s simplicity itself,” says Benn, who compares it to tapping into the London Underground with contactless or an Oyster card.

AIM-listed investment group Blue Star owns 27.9% and tried unsuccessfully to merge with SatoshiPay last year.  

Tony Fabrizi, Blue Star’s chief executive, believes SatoshiPay is a £100mln company in the making so his keenness to build closer links is understandable.

Ultimately, market conditions meant the merger was not able to conclude, but SatoshiPay has since gone on to raise £1.68mln through a funding round that valued it at £15mln.

Fabrizi believes the attempt to merge was a major assist in this funding.

SatoshiPay’s rising value was also a major contributor to a sharp rise in Blue Star’s own net worth in the year to September.

On a per share basis, NAV went up to 0.29p from 0.21p, even though Blue Star chopped the value of another of its investments Disruptive Tech by £1.3mln to £300,000.

Finger recognition advance

A significant rise in the value of Sthaler also helped the NAV and Fabrizi expects it too will develop into a sizeable business in future.

Sthaler has developed a finger recognition security system, Fingopay, with Japanese giant Hitachi.

Using infrared technology, the unique vein pattern of an individual’s finger is mapped against a template and can verify payment in seconds.

Already widely used in Japan, Sthaler has started to roll-out the technology at selected universities in Copenhagen and London.

More launches are planned for later this year.

Blue Star has a 0.9% stake in Sthaler, which had a value of £33mln at the September year-end.

Again, like SatoshiPay, Fabrizi sees the value rising to more than £100mln eventually.

Market disconnect

Blue Star itself is valued at £2.69mln at 0.14p, which is a 50% discount to stated NAV and a substantial disconnect to the potential Fabrizi sees.

As both of its star portfolio companies grow, Blue Star will have to juggle with the cash commitments required to maintain its stake.

But as the two companies have raised funds recently, it is not an imminent decision.

Blue Star itself raised £200,000 in January, which has given it some breathing space to sit tight while they develop.

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