The latest Investing Matters Podcast with Jean Roche, Co-Manager of Schroder UK Mid Cap Investment Trust has just been released. Listen here.
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I can see why the 5G was structured as it was, given the situation at the time, which was at least partially ENET’s fault for letting a massive slug of cash at ipo run down to next to nothing. What has surprised me is that it looks like both parties agreed to the further £1.5m, at a point where a straightforward cash raise would look more preferable. One does have to question the overall financial strategy but we are not privy to the full details.
Going forwards from the AGM it sounds like they are not going to put any effort into ir beyond mandatory releases and RNS and it will be up to the market to decipher and make sense of that. Methinks they are absolutely barmy if they think the market is going to understand the investment proposition here without help and guidance.
As TL says, initial orders are, by their very nature, modest in size. Given the massive 5G over hang and ENET’s reluctance to properly present themselves then we could well be in for a very long wait. To clear 5G we need substantive on going news to give the volume to wash them out. The chances of that look slim. There’s always a fair chance ENET will try to hide good news in a RNSNON or interview.
Given that they are not stupid people, one can only assume there is some other agenda at play here. The most obvious one is some collusion with 5G to deliberately suppress the sp until ENET’s masters, 5G, give them the go ahead.
All very strange and I guess we will be becalmed in no mans
land for quite some time. Or perhaps they might change tack when they’re after more cash.
I disagree about the chances looking slim. 5g IF can pass very quickly on strong news which attracts volume.
We have seen days of massive buy to sell volumes and it won't take many of those to clear. The terms of the deal are quite standard and they are maintaining an orderly market. 5g has no interest in trashing the share price and will pay the going rate minus a discount as we know. I don't think that this was about making huge profits. It was about funding Ethernity so they could make that very nice FPGA switch for Tarana.
The management needs to talk and explain but it's all about timing.
We are going to doesn't cut it, we are doing is what we need. Unfortunately they prefer we have done.
We have Interims in September and I am expecting a piece of plus news this month and a second piece with the interims or immediately after
Certainly things look very positive currently. The market is moving and clients are now at commitment stage.
The next 12 months will transform this investment.
https://www.lightreading.com/open-ran/axis-of-o-ran-japans-rakuten-to-build-1and1s-german-5g-network/d/d-id/771297
Iain misses the point here. The function is that is Integrator. The outputs are Open so a potential market for Ethernity. Private networks will form within this network. Great opportunity in Germany.
Uhlf.
A cash raise is not straightforward as you have stated.
It would have to have been at a massive discount to current price meaning more shares vs cash raised. It also does not give certainty as some shareholders would not subscribe, even at deeply discounted levels. After the earlier cash raise it also looks like the management have completely misjudged cash flow forecasting, ENET have not been in a position of strength here.
Uhif I am obviously missing the point. 5g IF don't care what the strike price is . All that's important is that the share price heads up after. They can't take shares until they sell down or they go over the reporting threshold. Of course it won't say Tarana on the notification anyway just 5g IF but they don't want the attention I am sure.
Certainly the Ethernity management will have a lot of distance between themselves and 5g IF. I think that you are thinking way too much about this. It's a temporary that will change very quickly.
Skid misjudged by two years. They budgeted for income 2019 and spent on R&D accordingly. A big mistake.
Skid
No reason why any cash raise has to be at a massive discount. No reason at all.
Don’t forget 5G IF is at a 10% discount , lowest price etc in last 20 days on an already suppressed sp. That’s the true cost of 5G, there is your massive discount, we’re living with it every single day, as ever accepting at the time etc etc
A small cash raise like 1.5m would attract a substantial discount and disproportionate fees it would depress the share price immediately. In this scenario Ethernity got the cash in advance which was important at the time.
Ethernity made a real mess of it and I am surprised the CFO survived it.
In future I suspect that they will be knocking on shareholders doors. They have my details and I would support a fund raiser for the right reasons.
Soft toilet tissue in the executive toilets won't be good enough.
TL , with reference to my ‘slim’ comment, it was in respect of ENET properly presenting news in the correct context and explaining the scope of contracts, in other words fully supporting any news that they release. Nothing to do with the chances of strong newsflow, which look good. I make that comment as the reports back from the agm say they are going to let the contracts do the talking . Well, we’ve just had the UEP deal, which Dallo quite rightly called a ‘big deal’ and it’s hardly made a ripple.
Perhaps further ‘big deals’ will and it’s a cumulative effect. But I’m left with the feeling that unless ENET make some effort then further big deals will just pass the market by as ENET make no effort to present them, put them in context or otherwise support themselves in the market.
TL
Re CFO survived it, I’ve made that point in the past and got roundly castigated for it!
To be fair not all the blame can be laid at MR’s door, but the saying that ‘you had one job’ comes to mind.
Still, it’s in the past but I just get the feeling that these guys may be tech savvy but they ain’t street wise. Anyone surprised DL got done over at Broadlight?
Uhlf.
If they wanted to replace the 5g money coming they wouldn't have got a placing away, even for a proportion of it you are wrong, it would have to be at a massive discount.
Not really sure you understand the role of a CFO. The basics of accounting, controls and compliance are taken for granted. THe CFO is usually the number two, deeply embedded in every aspect of commercial decision making and strategy and the sounding board for the CEO.
Skid however the CFO is there to guide the CEO on the financial aspects. Clearly there was a huge failure.
I suspect that they had an expectation of something else that didn't pan out and then the timing was shocking.
skid, I don’t think I am wrong, but it’s difficult to prove either way. My suggestion was that I’m surprised they took the additional £1.5m from 5G, that assumes they take the balance £750k. There should have been other avenues available to them, without a massive discount. Quite honestly that’s a ridiculous thing to say. It shouldn’t be a hard sell to promote the attractions of ENET without a massive discount. Most other companies don’t have massive discounts, unless they are in dire trouble or badly managed.
As to understanding the role of CFO, it varies from company to company, from the bean counter to those intimately involved. As a former chief exec with a plc I’m very aware of what’s what, but thank you for the advice!
Unfortunately as soon as you start openly talking about it the MMs know and start walking you down. Then we can expect a 20% discount from a -20% position. That's the reality and the point of looking amongst the current shareholders.
However it raises the ugly question of being inside.
I will contact Mark and ask to be included if such an event takes place.
If the funding is against a contract as I suspect it will be then many avenues are open.
However I expect a $2m chunk from each DU contract.
TL
You don’t always get 20% discount from shares already walked down 20%. Whilst it’s true that happens in far too many cases, there’s plenty where the sp only comes off very slightly and the placing is done at around the current sp.
If you get 20% then 20%, assuming no internal leaks, you need to sack your broker/nomad, as they are robbing you.
Unacceptable, imo.
Every one I have seen goes like that. Then what's stopping them selling straight back. I see it as non issue at the moment. We do need 5g gone but who knows they may keep 4.99%
A load of events coming up over the next few months. David will be spending time in the US. Denver and LA.
This should be a good opportunity to talk about how clever they are.
One week since we heard of immediate production orders for a new product with revenue equal to 6 months of last year with an expectation of doubling in 2022 and increasing sales beyond.
The share price is now back below those levels.
This is a good solid order that underwrites the investment in R&D with much promise of further UEP orders as vendors and Integrators wait for completion of the product. The company expect a significant volume of orders from the aceNIC UEP and it's prime for adaption to multiple roles.
It's really a dream product as much radio capacity is installed and this really changes how they work to be much more effective.
Immediate markets mean immediate contracts and immediate deployment.
The share price however cannot see that yet.
We need news, more news then a sprinkle of extra tasty news on top. Pronto!
Actually there's plenty of news already for a sustainable share price multiples of what we have today.
Interesting that the microwave vendor that I believe is engaged on the last contract is the microwave vendor for the Dish 5g network. It's a small world at the top where only the best gets selected. This microwave will likely be used for the DU. Then the DU solution from Ethernity through Dell could very well be used for the Dish DU function.
However we need the management to explain all this as it's invisible to the market.
Why didn’t I ask bid to ask the team why somebody on the lse chat board is dealing out a million percent more information than they are. Same difference. More news more hype more presence needed. Atb
The thing is my posts aren't news just the findings of my research and a chunk of detective work. There are many human intelligence contacts available all very keen to tell me how clever they are. Some are on an ego trip and some looking for opportunity not knowing who they are talking to. However with sources and importantly corroborative sources a picture is forming.
Interesting the joint piece with Tarana as Steven suggested it was all his work and he kindly copied Brian on the credits as he sent the lead. I have sat through many boring courses about type identity and style and as I read the piece I put most of the style down to Brian given what we have seen so far.
Steven naturally wanted to talk about Tarana not Ethernity and played down Ethernity role. A prime example of ego driven which I largely filter out. However I learnt much more from him than I did from Ethernity.
I agree 01234 - I've learnt a lot more from TL than I have Enet.
Enet's RNS's hold factual details on each contract but everything else like where aceNIC, UEP and DU's all fit in, how they will work, who with and the likely outcome I've all found on this BB.
There must be some non-monetary reason why the ENET bod are so incredibly reticent to share their vision of the future with the outside world. You would think that they understand the game of PR to raise the company valuation and limit dilution in this pre-revenue stage. But no, it's almost the opposite.
Agree 01234, far more info from TL about how ENET’s products fit in the bigger picture than what ENET give us.
The last December update really got my interest, but since then they’ve not really been to forthcoming.