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I know I'm going to get it in the neck here, but that's my honest view.
I got it wrong on the entry into administration, which I said was "unlikely" to occur yesterday. So I am very aware that my judgment can go awry.
However, I spent yesterday researching IP valuation and I can't see how the AFT IP can realistically be valued at less than £10m. I realize that if there's a fire sale then the administrators may have to accept whatever price is offered to them. However, there are plenty of sophisticated IP players, including patent troll companies that can calculate the revenue potential from the ConMet and Saietta VNA licenses and make an appropriate offer.
Then there's the Propel IP which was described as "highly valuable" in the latest accounts.
There's also the Saietta VNA 49% stake. Saietta VNA is basically expected to be profitable from the next financial year. Often JV agreements include a put option whereby one party can force the other party to buy their stake (typically with a 15-25% discount to the fair market value). So there could well be decent value there.
This isn't a typical administration where creditors are chasing the company and there's massive debt. The company's run out of cash and doesn't have enough time to sort things out. However, that doesn't mean it doesn't have very valuable assets that are worth more than the debts.
I did try to warn you all..
Maybe listen next time someone experienced tells you not to buy
Neil, have you for one moment considered you might be wrong?
Have you even thought about how much the assets are worth and what they could be sold for?
I agree Maxi19. The company still is valuable and in the popular electric sector. My gut feeling is a competitor or a JV partner is bound to be looking at this tasty morsel. I believe that an offer will be made that will see shareholders walking away with something. Certainly not 0.65p which is the suspension price. Its just got to be a takeover or a management buy out at this stage. There are still many reasons to be optimistic as there are many scenarios that can play out.
Fingers crossed that those affected can still salvage some money out of this. GLA LTH.
Saietta VNA for example is projected to have £42m EBITDA in FY 26/27. If you apply a modest 10x valuation then that would be a £420m valuation, so a £210m stake.
Obviously no-one is going to pay anything like that right now, but to think that the 49% is somehow worthless just doesn't make sense.
Maxi19 - In my view, the administration process has no obligation to shareholders. The shares are effectively worthless because the company has announced they cannot continue trading.
A buyer can come in and say to the administrators: "we'll cover your costs, staffing costs etc and take on these listed assets. We assume responsibility for these liabilities." Job done.
The administrators get their money, some staff and other stakeholders will be happy because the process will preserve their ties.
The purchase price is what is paid to the administrators and any other costs the buyer has to cover.
What wouldn't make sense to me is a buyer coming in and saying "we'll cover all of the above and also put in an offer of x pence to shareholders." Why would they do that?
The administrators have control of the company, they've been appointed by the board.
They have no regard for shareholder interests, so an offer to shareholders would be the equivalent of a Christmas gift.
It's not going to happen! Nobody chucks money away for the sake of it.
FlyingHigher, I see where you're coming from but I don't think it quite works like that. Administrators have to value the assets and I don't think they can simply sell a company with an asset worth 1000 for 1 on the basis that the buyer assumes liabilities of 500. I think they would be obliged to sell the asset for 1000, settle the debts and shut down the enterprise. But to be honest I don't know that much about it.
In any case, LinkedIn suggests that most of the employees and directors have been made redundant. Which is very sad of course. So it seems that the administrators will try and sell the individual assets.
It feels grubby to be speculating about whether there's money to be made when people have lost their jobs so I may leave the posting for a while.
A friend of mine is an Administrator, dealing with property assets. They are obliged to get 'market value' so invariably use the auction route as it tests the market and has a high degree of certainty of a quickish sale. It will certainly test the assets figures in the accounts. Not sure what the company owns and what is rented. The Administrator can bring a lease to an end , if needs be.
They are obliged to get 'market value'....ok, may be true of property, but you have just seen exactly what the market value of Saietta is in the market!
I have seen this with a company similar to Saietta before, the will hope someone comes along an makes a reasonable offer to pick up and sort out all the tangible stuff (which the administrators won't want to do) plus some value for the IPR. There is no obligation to sell to the highest bidder especially if it comes with added complexities for the administrators....
I don't know much about it either and yes I'm guilty of speculating too much.
For those who still consider that there is value to be had, why not post an offer to buy to any other shareholders wishing to sell their shares? There must be a number of holders in sufficient size which would make a deal attractive to both parties.
Market cap. at suspension is indicated as £944.19k on LSE against business value suggestions of £10m and more, whilst the s/p bottomed around 0.3p and rested at 0.65p when suspended. Surely adequate scope to make a decent return according to the reasoning that has been made. So, gentlemen (and ladies, if present) how much are you willing to offer others for their shares and in what volume?
What I suspect has happened is that potential buyers are interested in the AFT and other patents, the Saietta VNA stake and the Propel IP, maybe not one buyer interested in all of them but individually.
What they're probably not interested in is the UK operations, that is Silverstone and Sunderland, which on their own are hugely loss making. However, even though a buyer could have come in and shut all those operations down it would have generated very bad publicity and it's also possible the board, in order to support a takeover offer, would have wanted guarantees that the business would have been recapitalised.
Without Silverstone and Sunderland the business shouldn't have too much expenditure. If the Propel IP were sold for a decent amount it's even possible it could become a shell holding the AFT IP and the Saietta VNA stake.
Without Silverstone and Sunderland the business shouldn't have too much expenditure. If the Propel IP were sold for a decent amount it's even possible it could become a shell holding the AFT IP and the Saietta VNA stake.
Haha my god the administration team will be in bits laughing
Neil, I don't think anything you've written here has engaged with the business fundamentals.
The administrator has to write a public report explaining what everything was sold for / what it was valued at, so there will be full transparency. So let's have your predictions on what the following will be sold for, either collectively or individually?
- the AFT IP
- the Propel IP
- the 49% stake in Saietta VNA
Or do you think they're all worthless?
Yes NicName I take your point. It's certainly unethical, but people will also say it's each individual's responsibility to conduct own due diligence.
True, FlyingHigher, but new or young investors / speculators have to start somewhere and in practice can readily be drawn in when it appears there is a opportunity to make an easy quick return. If we are to be honest with ourselves I would expect we've all been there at least once! However, some newbies learn quickly and others are less astute. There are many opportunities to in the markets make a dollar without encouraging the naive to loose theirs. It's a practice which bears similarities to pickpocketing!
They're taking control of the company for the benefit and best interests of the company's creditors -- not your interests. This is the Alternative Investment Market, you'll get bugga all.
For those of you unable to even consider a possible shareholder on an administration, consider this hypothetical:
- I set up a company and use it to purchase a £100m diamond.
- the business is getting people to pay to see the diamond. The company rents a store for £1m/year, fits it out with expensive security devices and hires several staff.
- the entry price is £20, but not enough people buy tickets to cover the cost of the rent, salaries and insurance.
- the company goes into debt of £20m but the business is unviable. It runs out of working capital and goes into administration.
In that scenario, where the creditors are owed £20m but the diamond is worth £100m, would I, as shareholder of the company, get a return?
@Maxi19, good luck with that.
In almost 99% of all bankruptcies, shareholders don't get anything.
Think your hypotheritcal something realister:
- Saietta assets consist of dedicated production machinery. They do not own 100m of diamond, but in the best case 30m of IP value. This is only value on a production that is not yet finished. The assets such as production machinery will be made specifically for saietta and which other manufacturers are unlikely to want.
-so there might be a theoretical value of 100m, but in practice it might be 30m. In the end, it's also about what other people will give for it then.
- Given Saietta's numbers and burn rate in recent years, the cost of personnel and rent is a lot higher than that 20m.
We haven't heard anything about the amount of debt, but if they run out of cash as of September I expect the debt mountain to be quite high.
- In addition, first EY will start paying out their salary from that for administration costs and these will not be cheap. Then also the government the rest of the debts and only then come the shareholder.
So of that 30m worth of assets, maybe 1m goes to EY, 5m government and 30m to other debts.
Good luck with getting something. Just look at all the other bankruptcies, shareholders almost never get anything.
Oh and well don't forget that in the past no stuff has been sold from Saietta, only orders were placed that are worth nothing because Saietta cannot deliver. That means no money but will flow to Saietta.
Max you have lost your 100 quid lol
Give up and stop dreaming
RGhost, that example wasn't me saying Saietta has assets worth £100m, it was just an example.
Have you looked at the latest balance sheet for end of September? It doesn't show a mountain of debt. The company has no loans and no secured debt. It will need to pay outstanding creditors, accrued salaries and the costs of the administrator. After using its current cash and receivables and flogging off the plant and machinery and inventory I don't see how the net amount owed to creditors will be over £5-7m. They could well be significantly less.
So the question is, can the AFT IP, the Propel marine IP and the Saietta VNA 49% stake be sold for more than that amount? If they can't shareholders will lost everything. If they can shareholders will be in the money.
I personally don't know enough about the tech to know how much it can be sold for but I wouldn't bet that someone will pick it up for peanuts.
So that me
Sorry to disappoint, but the shareholders will not receive a penny now. Better to start coming to terms with that.
Maxi, if you can't see what's wrong with your hypothetical scenario you haven't much hope of grasping the SED situation, but to provide you with a very simplistic analogy reflective of your own, just suppose the 'diamond' is paste.
The shares are suspended so there's no incentive for me to ramp. My judgment is often faulty and it's true that 95% of administrations don't provide a shareholder return so the odds are stacked against it here.
But I still struggle to see how the debts of the company are clearly higher than the value of its assets. If anyone can explain how patents projected to earn up to £20m in royalties over the next few years and a 49% stake in a company with EBITDA projections of £40m in a few years are worth next to nothing then I'm all ears.