Following today’s news that Seeing Machines is having a deeply discounted conditional placing and subscription to raise £27.5m, the management of the company seems to have lost both the goodwill and trust of many private investors.
Indeed, the fact SEE couldn’t get even get a placing with existing institutional investors away at 5p tells you a lot.
It’s quite frankly shocking that the company had to offer shares at 3p in order to raise cash and follows a long series of fleet and train related mishaps that Chris Grayling would be proud of.
The only silver lining I can see is that with the expected OEM wins still to be announced it becomes a sitting duck for an opportunistic bid. My sources tell me that last year, after numerous ‘discussions’, it came close to being snapped up by Bosch for around 17p. Well, I dare say, it is still available at a knock-down price.
Anyone want a to buy a company with great tech but poor management? 10p? Anyone? 7.5p?
For those investors despairing tonight, I’ve some hope. Ironically it comes from house broker Cenkos who put out a note today. Analyst Jean-Marc Bunce clearly cares about his reputation and though he lowered the price target to 9p, Bunce can’t help but admit on page 15:
“Strategic value is significant – 39p at 8% discount rate
To demonstrate the significant value in the increasingly visible future cash flows from Seeing Machines’ automotive license fees, we note that a large organisation with a market average Beta of 1 would have an equity cost of capital of 8%. At an 8% cost of capital our valuation for Seeing Machines rises to 39p and we note the weighted average cost of capital for a large corporate would likely be even lower through debt financing.”
In fact, the more times I read this note the more I get the sense that it is setting out a case for SEE being sold at a particular price. We’ll see.
The writer holds stock in SEE.