The Changing Face of Peeks

Yesterday, Peeks Social (PEEK) announced the launch of  real-time payouts with its own Visa debit card. The market reacted very positively at first, but today the stock price has once again pulled back. Peeks seemingly forever takes one step forward and two steps back, no matter how material of a news release the company puts out. Why did this happen?

We are seeing the changing face of Peeks. Recall that one of the major reasons to buy into this stock back in 2016 was the idea of a ubiquitous social commerce platform. Peeks was going to manage the entire payments process through its own wallet, both tippers and the people receiving the tips. This has had its problems as users have complained about delays in getting paid. With the launch of the Visa debit card, it looks like that the company has given up on this idea.

There are several positives to this development:

• This should finally end any delays in getting paid. In fact, this card looks like one of the best and quickest ways for influencers to get paid on these kind of social commerce/media platforms.
• Peeks can get rid of Paypal now, and they absolutely should.
• The card itself is a way to advertise. I expect the user base to grow faster now that this very legitimate, well-known and trusted way to get paid is available. 

These benefits, along with the simple name of Visa attached to the PR is likely what caused the stock to do so well yesterday. Now why is it pulling back today? Because this news doesn't come with no strings attached:

• We have no details on the agreement. How much of a cut is Visa getting? I don't expect it to be much (in the low single digits), but could be higher based on the next point.
• With Peeks being on the borderline of a porn app, Visa adds another layer of complexity where it could potentially wag its finger at Peeks for its content, a la the iOS issue seen in early 2017. I don't expect this to be a huge risk since there are other porn sites out there that accept credit cards, but I can imagine that their rates would be higher than average.

Overall I am bullish on this news, more bullish on PEEK at 30 cents today than I was earlier this week. It solves existing and near-term problems and should positively impact user base growth right now. But I also think this limits long term upside. PEEK will forever rely on a third party payment processor now. There is no going back from this once the card is out there. I expect the penetration rate for the card among influencers to be nearly 100%. Tippers, assuming they only make deposits into the Peeks wallet (even if they earn income, that goes to tips), will likely stick with their existing method of payment.

UPDATE:

Mark Itwaru reached out to provide a rebuttal when I stated that "PEEK will forever rely on a third party payment processor now". His response was that Peeks can easily disintermediate from any third party processor and there may be plans to do so in the future. This is good news that the company has that intention and I believe that from a technical standpoint it can be done.

However, to clarify my point, I think there will be potential customer service issues down the road should Peeks decide to do that. The company would have to navigate that change carefully should the Peeks Social Visa debit card become as popular as I think it will.