Seeing Machines (AIM:SEE), the Australian software company specialising in eye-tracking technology using innovative algorithms, looks set for a significant uplift in its share price with confirmation that it is launching a spin-off in the US dedicated to serving the automotive sector by the end of June.
The stated intention is that the company will follow the Mobileye trajectory and eventually IPO in the US, a prospect which is likely to have both institutions and shrewd investors clamouring for shares over the next few months.
Despite recently announcing a maiden interim profit, its share price had been held back by concerns that it would need to raise more funds in order to serve demand for its world-leading technology.
However, in an exclusive interview with Ken Kroeger, CEO of Seeing Machines, he revealed that the company is set to raise between US$50m to US$100m setting up a spin-off that will focus exclusively on the auto industry and develop a new hardware module.
This should produce 3 main benefits:
- It will take development costs out of the overall business.
- Enable Seeing Machines to move up the value chain by developing hardware (which will be manufactured by a third party). So, instead of getting $10 a car profit, it will be able to get between $25 to $35.
- Enable it to work with more Tier 1 suppliers and OEMs.
As part of this Seeing Machines has signed a memorandum of understanding with Takata, that officially ends its exclusivity deal with Takata.
The new company will be called ‘Fovio’ and is expected to be launched by the end of June this year.
Ken Kroeger, CEO of Seeing Machines explained: “It will be a separate, US-based company. It will have about 40 people and take about 35% of the cost out of the parent company. The US company will own 100% of the Australian subsidiary that would house around 40 employees. Seeing Machines, and the current shareholders will not have to reach into their pockets and write a substantial cheque but will own a substantial portion of that business.”
When pressed as to what “substantial portion” meant, he explained that is how he had to refer to it.
He added: “That business would be completely set up to start its march towards an IPO on the US board, mirroring Mobileye’s journey. It would have a separate board, separate management and we are in the process of recruiting a CEO in the US.”
As to the backers, he revealed: “The investors are at the big end of town (sic), we already have term sheets and they range from automotive OEMs, through the silicon companies into some of the other strategic industrial partners that we want.”
The new module is expected to come to market in late 2018, early 2019.
Until then, Seeing Machines will be continue working with Takata on delivering its software, as Kroeger explained: “The good thing is that we continue working with Takata. It is a new agreement not a divorce, so in the interim we will keep on delivering with Takata.”
Seeing Machines and Takata will be working on another 15 models for the same OEM that it has been working with to deliver a model that will be go into production late this year to be on sale next year. In addition, it is working on another 3-4 requests for quotations expected to happen this year.
That OEM is rumoured to be General Motors and the model that will first use Seeing Machines driver monitoring software, as part of it Supercruise feature, is said to be the Cadillac CT6.
The writer owns shares in Seeing Machines