iSelect loses its boss

Could it get any worse?

After the bungled float, the sinking share price, the miss on earnings just weeks after listing, we now are told that revenue will miss prospectus forecasts.

And that's not all. Matt Mcann, the chief executive who led the float just four months ago has walked.

Perhaps it would have been a good idea during the IPO for iSelect (ISU) to offer insurance against falls in its share price and shoddy forecasting.

In a detailed announcement to the ASX this morning, the insurance comparison website reiterated its prospectus forecasts for EBITDA – targets it said it would hit – but confirmed that revenue would fall below its float predictions.

Even on the EBITDA, that specified target listed this morning excludes the cost of compensation to the outgoing chief executive and expense of searching for and hiring a replacement. Essentially then, that means it won't hit the EBITDA forecast.

The constant attempts to paper over the problems has trashed any credibility left after the disastrous float (see Brendon Lau's Making money from small cap IPOs).

Just weeks after its listing, it was under pressure from the corporate regulator to confirm whether it used up to date figures in its prospectus, given the company listed just days before the end of the financial year and the reporting period.

Sold at $1.85 a share, iselect sank from its debut in the opening minutes and never once has even appeared close to ever reaching those lofty heights, closing Friday at $1.26. This morning it lifted 3% to $1.30 as investors welcomed new leadership.

But the company's biggest problem is its business model.

As a comparison website, it owns no inventory and merely clips the ticket on sales from other providers. More worrying, its technology is easily replicated, delivering low barriers to entry from potential rivals.

That already has begun to occur with the arrival of global players like comparethemarket.com.

The vulnerability to competition injects a large dollop of uncertainty into earnings and necessitates a huge advertising spend to simply maintain market share, let alone increase it.