As Seeing Machines approaches its November 26 AGM, shareholders are becoming increasingly concerned about the lack of a longer-term refinancing agreement with Magna International.

The existing convertible loan notes, with an original principal of US$47.5m, were due to mature on October 4. An interim extension has bought the company until November 30 to negotiate a longer-term arrangement. But the clock is ticking, and the share price has come under pressure as investors wait for news.

Magna is clearly in a strong negotiating position. But there is another player whose interests could prove significant: Mitsubishi Electric Mobility Corporation, the wholly-owned automotive subsidiary of Mitsubishi Electric Corporation, which owns 19.9% of Seeing Machines.

Mitsubishi Electric Mobility invested £26.2m in Seeing Machines in December 2024, initially through a subscription for new shares at 4.09p, and subsequently increased its holding to 19.9% through purchases from existing shareholders.

This was not simply a financial investment. The two companies agreed to collaborate on automotive opportunities, including accelerating the adoption of Seeing Machines’ driver and occupant monitoring technology among Japanese manufacturers. Their relationship has since extended into commercial opportunities for Guardian, Seeing Machines’ fleet-monitoring product, as well as robotics.

The size of the investment makes Mitsubishi Electric Mobility a significant shareholder, with an obvious interest in the company’s long-term prospects. It also gives it a potentially important perspective on any refinancing deal that could substantially dilute existing shareholders.

The dilution question

One possible outcome of the negotiations with Magna could involve some or all of the outstanding debt being converted into equity at a revised price.

The potential dilution is considerable. The original US$47.5m principal, together with accrued interest, means the amount owed could be materially higher. If the total liability were around US$63m, and converted at an illustrative price of 2.9p, it would require the issue of approximately 1.65bn new shares, based on an assumed exchange rate.

That would represent dilution of roughly 25% for existing shareholders. Mitsubishi Electric Mobility’s holding would fall from 19.9% to around 14.9%, assuming it did not participate in the issue.

There is an important qualification: the existing convertible notes have a contractual limit of 386.4m shares that can be issued on conversion. A conversion on the scale illustrated above would therefore require a renegotiation of that provision or a different financing structure. This calculation is intended to show the potential scale of dilution, not to suggest that such a conversion is currently proposed.

Would Mitsubishi Electric Mobility be comfortable with a deal that significantly diluted its shareholding? It might be prepared to accept some dilution if the alternative were to leave Seeing Machines financially constrained, but it would presumably want to protect the strategic value of its investment.

There is no public evidence that Mitsubishi Electric Mobility has a veto over the refinancing, or that it is directly involved in the discussions with Magna. Its 19.9% holding does not, by itself, establish either. Nevertheless, its presence adds another important shareholder interest to the equation.

Could a compromise be emerging?

One possible solution would be for Magna to agree to a longer extension of the existing notes, but on revised financial terms that provide it with a better return.

That might involve a higher interest rate, a more favourable conversion price for Magna or additional equity incentives, while retaining a limit on the number of shares Magna could acquire. Such an arrangement could give Seeing Machines more time to benefit from its growing automotive royalties and emerging opportunities in robotics, without imposing the full burden of an immediate repayment or a heavily dilutive conversion.

It could also suit Magna. Moreover, Magna isn’t negotiating in a vacuum. The company has a financial interest in recovering its loan, but it also has a commercial relationship with Seeing Machines. Its technology is incorporated into a mirror-based driver and occupant monitoring system supplied by Magna to a major German car manufacturer, Volkswagen. Preserving that relationship and the supply programme is an additional consideration, quite apart from the value of the loan itself.

For Mitsubishi Electric Mobility, a solution that gives Seeing Machines the financial headroom to pursue its automotive growth and develop new markets would help protect the strategic value of its shareholding.

This is, of course, only one possible scenario. There is no indication that such a compromise is being negotiated, nor that Mitsubishi Electric Mobility has been asked to support it. But it illustrates why the interests of the three companies may not be as far apart as the current uncertainty suggests.

Seeing Machines has said it is confident its FY2026 audited results will be published before the AGM on November 26. Investors are hoping that, prior to that, the company will provide clarity on the longer-term financing arrangements.

The writer holds stock in Seeing Machines.