London South East prides itself on its community spirit, and in order to keep the chat section problem free, we ask all members to follow these simple rules. In these rules, we refer to ourselves as "we", "us", "our". The user of the website is referred to as "you" and "your".
By posting on our share chat boards you are agreeing to the following:
The IP address of all posts is recorded to aid in enforcing these conditions. As a user you agree to any information you have entered being stored in a database. You agree that we have the right to remove, edit, move or close any topic or board at any time should we see fit. You agree that we have the right to remove any post without notice. You agree that we have the right to suspend your account without notice.
Please note some users may not behave properly and may post content that is misleading, untrue or offensive.
It is not possible for us to fully monitor all content all of the time but where we have actually received notice of any content that is potentially misleading, untrue, offensive, unlawful, infringes third party rights or is potentially in breach of these terms and conditions, then we will review such content, decide whether to remove it from this website and act accordingly.
Premium Members are members that have a premium subscription with London South East. You can subscribe here.
London South East does not endorse such members, and posts should not be construed as advice and represent the opinions of the authors, not those of London South East Ltd, or its affiliates.
It does state as clearly as possible what the funds are for.
"providing additional working capital to allow the Company to support the growth and delivery of the recently secured contracts and engagements for its 5G offering towards successful field deployments"
This is supported by the presentation that details multiple contract opportunities. The detail we lack is the functions and investment/development required by Ethernity. That's because we have no indication how these OEM deals work. We are told by Marc that Ethernity are not a hardware company, they don't make hardware so it leaves us none the wiser as to who does and the cost to whom.
This fund raiser is £11.6m or so which is huge. All said the average price will be around 45p a share assuming a 90% take up of 60p warrants.
Not great value for us and the timing was appalling given the share price momentum at the time. 60-70p was inevitable given the interest.
Obviously these things take time to organise and it's unfortunate for shareholders but it's part of the risk.
I am more focused on what £11.6m buys.
This year has been excellent for the company and after starting with a vague coming soon outlook we now have sales and contracts that will produce more sales, many more sales.
The presentation was revealing. The DU can provide 3-5000 card sales. So we are talking about Europe national deployments by that size or partial deployment on a National US network.
These contracts between the server vendors and their clients are gaining momentum now and really a announcement is near term. The numbers will be around $5m a throw and multiple in nature. I still believe that we'll see design fees of around $2m.
TietoEvry collaboration has sparked my interest again as the UPF China market is maturing and China can't move forward adding compute. I know that we'll get a Private network Contract very soon with TietoEvry as Integrator which will produce around 2000 card sales. There should be many more in the pipeline. The difference between China and US is that China really has no option but to move rapidly.
Uhlf
The company is restricted by Market Abuse Rules in making forward looking statements in a placing document .
Hence it could not mention existing contract negotiations which may or may not come to to fruition .
However I am led to believe the fund raising was to finance existing, and future business opportunities.
I suggest this is the case but it is my personal belief for what it is worth.
Also I as a major shareholder could not be approached directly because of the very same Market Abuse Rules.
I can say no more as I am not conversant with what is going on in Ethernity.
DYOR
Dallo , fair comment.
Yes, let’s see what they deliver over the remainder of this year. Agree, no more excuses.
I sure hope Levi and co know more than us lot! Like you, I’m also confident they will deliver.
I will try to return now to commenting on the business prospects and other matters and not the damn placing!
Although I hope I’ve got my allocation!
Skid/Uhlf
I fully agree with some of your observations only if this was an opportunistic grab for cash without a valid commercial reason.
If no substantive deals emerge in the next 3 months I will be deeply disappointed and will also question the basis of this fund raising and the intellect and acumen of management.
We all now expect serious delivery to justify this continual dilution .
Time will tell but I accept everyone's disappointment ( including mine) at the drop in the SP.
I suspect Levi and Co know much more than me and the rest of us.
Time to show us what they are made off and no more excuses.
I believe they will in spades.
PS
I wonder whether it was a small number of Institutions involved and will any of them have gone over the reporting limit.
Just a thought!
Thanks 01234
I sure don’t want to keep banging on re the placing, so will try (!) to call a halt, but it’s pointless, imo, glossing over it and pretending ENET are financial gurus , which has plainly not been borne out by their AIM history. Almost typical
AIM!
However, the range, breadth and depth of products developed with not a great deal of resources indicate to me there is another side to this company. They appear on the cusp of serious revenue breakthrough and the market cap, assuming c 80m shares, is still very modest for the stage ENET are at and the opportunity. That is why I remain a buyer at these levels.
You sure are stacked up now uhlf! A lot of buying today Atb
dallo, I like your scenario, which ENET investor wouldn’t?
But it is not borne out by the statement the company gave as the reason for the fund raising, namely to support recent existing contracts. Nothing, zilcho, not even a hint that some event had derailed their confident funded for 2022 statement.
If they had to react to an unexpected or fast changing situation then for heavens sake just say so, investors deserve that and deserve to know if our company’s prospects have suddenly ramped up in a few weeks. It’s not hard to say that without breaking any confidences etc.
‘Due to recent anticipated increased forward demand we feel it prudent to raise etc etc etc’ .
How hard would that be?
As much as I love your scenario, investors would do well to read the official reason given. Are they sandbagging us, not giving us the full picture or economical with the truth?
Who knows. All we can say is this latest statement is at odds with their interim statement and only ENET know why.
Reminder of what ENET actually said yesterday:
The net proceeds of the Fundraising of approximately GBP3.94m (excluding any additional funds raised through the Broker Option or the exercise of Warrants) are to be applied to strengthen the balance sheet, providing additional working capital to allow the Company to support the growth and delivery of the recently secured contracts and engagements for its 5G offering towards successful field deployments.
Dallo.
As you know a LTH and ENET champion with a share subscription placed so you know where I think the company is heading, but come on a little balance please.
Why the hell it is a surprise to an experienced board that, within the opportunity pipeline individually and in totality that ENET have, that a company trying to contract with a multi year, multi $m contract operating at the very heart of their service operations would want to deal with a well funded company. I know you're a very senior qualified finance guy with a shed load of experience, you know this really is GCSE level stuff not advanced financial management.
For the board to then categorically state 100% (in an interim report where they have very specific legal and statutory obligations) that they are fully funded for 16 months, 16 months in this industry, - no ifs, no buts - when they are aware that clear investors are specifically looking at this specific key piece of information is problematic. I had been a fan of the very conservative IR from ENET knowing just how difficult it is to forecast a business with binary opportunities, leading edge tech in a market still in the womb - so this really stuck out.
I am of of the same opinion as you that (hopefully) there is an exceptional, unexpected level of business opportunity here developed since the interim report, which was completely and totally unforeseeable. If ENET does win big, their delivery, operational and financial management needs to be absolutely top notch.
Anyway - all speculation hopefully we will all be laughing about these conversations by the end of the year and we can all toast a virtual beer if the UK shops haven't run dry.
Fairview
I think ENET are more than capable of bringing the sp down without my help.
I give credit where it is due and where I think there is valid criticism, I give that as well. I’m not one those investors who won’t criticise a company just because they own shares in the company.
ENET have done plenty that is right. They’ve also made mistakes. The fundamental mistakes here are not in raising the cash, but raising it a matter of weeks after saying they didn’t need it. Then they compounded that by offering a stupid discount. Bottom line is they haven’t covered themselves in glory and their AIM track record is poor. They need to deliver now. I think they will, hence my support in the placing and buys in the market place.
I sure hope we don’t reach a situation where the company is immune from posters criticism due to cheap jibes like yours.
I only want to say one thing - Hear hear to Dallo. Speaks alot of sense. Too many PI's take this stuff way too simplistically - the BOD have the played the hand given to them a number of times. Yes it is painful, but remember, we are basically taken part in a venture cap type company so for (i.e. needed lots of cash to get idea/tech off the ground in anticipation of the market being there in a few years, then had to adapt strategy to fash changing events on 5g which highly politicised). You'll only ever get a 10's of these types of opportunities in public market space - take it with both hands and look back in 2-3 yrs.
Dallo
Fully agree. To be honest, if I were at the management, I would have also raised funds. But at 40-45p. They are not stupid, I am not the clever guy on the room, so if the placing is at 35p there is a reason.
The problem on this chat was too optimistic and non-sense expectations by some participants.
I think the biggest mistake was before the July 2020 placing. Not well managed. IMHO. You do not remember what happens to the share price when the company says "we are going to need money"?......
So is your idea to keep talking the company down then uhlf and questioning the competence of the board so you can pick up cheap shares?
Sergi
Good review.
However let's remember what Ethernity had to deal with over the past 18 months
1 Global pandemic with Israel in severe lockdown for over a year.
2 5G rollout delayed
3 Change in strategy from licencing to higher value business solutions provider .
4 Emergency cash call
5 US/China trade /tech war which affected many Israel tech companies
6 Thousands of rockets fired into Israel from Gaza
many landing in Lod where Ethernity is based.
Then management showed it's mettle with Tarana , UEP etc ,visiting trade shows in US , vital US Patent secured, Tech Award finalist at Globo et al.
As for Mark misleading investors I can confirm the Interim statements were reviewed by the Board and the Nomads and were based on existing business and conservative new business forecasts
with no intangible aspirations.
So for example assume after Denver a large International telecom operator approached Ethernity with a sizeable deal proposal ( say $10m
over 4 years) but it's financial compliance department raised concerns about Ethernity's cash position in relation to a deal of this size.
Would you as a Board of a Public Company say:
A Sorry ..we have told the market we have enough cash for 2022 so thanks but no thanks or
B Arrange cash back stop with very interested Institutional and other investors and grab deal with both hands knowing it will be transformational.
Purely speculation on my part but this scenario is possible in the fast changing business/ 5G world.
If such deals materialise the effect on the SP will ensure the warrants are exercised thereby raising more substantial cash which in turn will give added reassurance to new customers creating a favourable domino effect.
This is PURE SPECULATION on my part but as someone who ran a Public Company you have to adapt fast to events which is what I think Ethernity did.
I understand the risks in Ethernity and we could all be deeply disappointed but the placing was inspired by events which management had to react to quickly.
If I am right ( rare I know!) then we will be happy campers in the next 6/9months.
My musings only so please do not take them as gospel.
DYOR
Picked up 50,000 @ 36.15p
Happy with that.
Dallo
Well said but they also had significant mistakes during the last 24months. I don't think this placing is a mistake, the opposite. But I would have liked it at 40-45p per share.
And something to note here. They had $3.5M in net cash which was enough for paying the opex expenses for 2021 and well into 2022. I do agree.
The ~$5.5M raised then support a potential $10-11M of sales during the next 12-18m at a 50% GM (they probably need to buy the inventory 6-12m in advance due to shortages). They also sell licensing at a 100% GM with no inventory in advance, so potential sales supported by this level of cash are ~$14M sales during the coming 12-18 months. And maybe, other deals put some cash in advance (I think Indian OEM), and the true level of potential sales supported by current WC is $15M+.
I expect $8-12M of sales into 2022, which now makes sense by level of WC, orders and projects.
Let's begin the growth.
That’s all fine and dandy then Dallo
Shame they had to put out a misleading statement at the interims. The bod have to take responsibility for that.
You mean The Patt and his creatures board…
Dallo would you be so kind to pm me on ENET ADVFN?
Summat occurin’
Dallo, I rarely comment on this BB as I am only a tiny share holder, I was upset by the placing as I was excited to see the SP finally moving north only to now see it crash.
I really like your post and feel confident that Ethernity are going to do well. Maybe you should get a job in "public relations" as you come across very good at it!!!!
A few facts required here.
16 months ago Ethernity ran out of cash before it could get its new strategy of being a business solutions supplier to major International telecom players off the ground.
Mark managed a rescue placing with warrants at 12p plus a Subscription Agreement with 5G which allowed the company to engage with customers in a market that had finally emerged after delays caused by the pandemic and other factors.
Ethernity's tech is smart and unique but moving from a licencing business to a business solutions provider required further R&D , marketing ,staffing etc costs.
They company has now reached a stage where it is competing for major multi dollar contracts with large multinationals who will only do business with a company with strong cash resources to finance contracts and where the tech supplied is superior and cost effective compared to the competition.
The deals Ethernity currently have in the pipeline or expect to have in 2022 are of a magnitude 10 times plus greater than previous ones.
Ethernity realised over the past few months that customers wanted it's tech but needed more reassurance on cash resources given the expected scale of the deals.
Ethernity ,seeing the potential size and value of these opportunities, acted quickly like most flexible small companies must do , and proceeded to add backstop cash to its Balance Sheet at a time when the share price was at the low 40p level.
The Institutions were keen to invest at 35p and the placing was oversubscribed .
This shows that insttutional investors see the great potential in the company and backed it firmly.
Mark is a top class FD who has managed to navigate a tiny company from potential collapse to now being the position to negotiate $10m plus contracts with strong cash support on the balance sheet.
Even after the placing the company's market cap will be just c£25m ..a bargain given its massive potential and excellent patented IP.
I fully expect the 60p warrants to be accelerated before Christmas and further groundbreaking deals to be announced by then.
So criticism of Mark and talk of insider trading allied to huge discount in Placing price is utter rubbish .
He should be congratulated in my opinion.
The SP is only going one way from here and I for one am happy with the stronger Balance Sheet and existing and future business opportunities.
DYOR
IMHO
Thought they might bounce a bit today. Will never understand the market. To me they are in a better position now than when they were 40p a couple of weeks back without the cash.
Ethernity is a nano-cap completely out of the radar, with a misunderstood and difficult technology, with a past of 0 execution (look the chart), and from israel (israeli equities trade at a discount). And was running short of cash.
I see no reason why the cost of equity shouldn't be 20-25%, as it is (look what happened each time they issued shares). An I said many times that the company should try to decrease it. If they had issued 12M shares at 45p, that's an extra 1.2M GBP of funding "free". Clearly they feel the impact of this high cost of equity.
At least now we have an IR presentation.
Can sell at 36.8 and buy at 36.535 for anyone interested!
I can give you examples if you like.
You think all companies dish out a 20% discount?
Dunno where you live but you need to get out more!