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100M shares is a 40% dilution for existing holders.
The financial benefits of moving away from a batch process are more than lost with this. I know it is easy to view in retrospect and I am sure that they were not expecting so many problems, but if they had stuck to the original plan and settled for a little slower initial growth they would have had the financial resources to move to a production line system at a later date.
The placing and Bookbuild commitments were obviously already recently agreed....and the SP has therefore been adjusting down to meet it , over recent trading days
The loan is quite possibly conditional on the placing ...so ..chances of it going through will be much better, once the placing finalises IMO
Clears the air in terms of the funding needs and gives clear opportunity to then focus on scaling up
BOD buying at 10p when you could argue they have been a key negative contribution to the low placing price ....is a possible contentious issue ....
Proposed Placing and Subscription to raise approximately £8.0 million (before expenses) via an accelerated bookbuild, and Open Offer to raise up to a further £2.0 million (before expenses)
Surface Transforms (AIM:SCE), manufacturers of carbon fibre reinforced ceramic automotive brake discs, is pleased to announce that it proposes to raise approximately £2.0 million (before expenses) by means of a Firm Placing and Subscription, and a further £6.0 million (before expenses) by means of a Conditional Placing (together, the "Placing and Subscription"), with a total 80,000,000 New Ordinary Shares at 10 pence per New Ordinary Share. In addition to the Placing and Subscription, the Company proposes to raise up to a further £2.0 million (before expenses), subject to the Board's discretion to increase the size of the Open Offer, by way of an Open Offer (together with the Placing and Subscription, the "Fundraise").
There has been am announcement just now regarding 10p find riase
Honestly I haven't a clue. We have a situation where the management have burned through working capital that should have taken them comfortably through to situation where revenues were flowing etc..Instead Johnson used it all up trying to sort out the production issues that came out of nowhere (apparently). So perhaps wee should be asking Coco the clown and Bundred?
Can I ask, has anyone had a go at working out the figures for the expected cash raise needed?
My estimate is around 7.8mil further cash needed by 31st December, with poss further 9 mil for 2024 capex if the hoped for 13mil loan doesn't cover that capex ( if that loan is for capex beyond the 2024 expansion - unclear on this RNS said something like 13mil capex loan would release on expansion of capacity in 2024 and 2025, so seems like it may be released at stages of further expansion, rather than to fund the 2024?
Of course that's all just my estimate, and using similar admin costs and R and D costs from the 1st half of 23 to make it. Plus its unclear how much extra cash is required to 'fix' these bottle neck, maintenance etc problems... so I added a guess to that.
Be interested to hear other's workings on this as how much is needed seems a critical question as to how punished the sp may be when imo that placement arises.
All imo etc. Apologies for any typos,
S
So what is your solution?
Completely agree with you. Cunningham jumped ship as you know leaving Maddock to pick up the pieces of what feels like a threadbare financial function. And it appears that was matched by a manufacturing operation geared to showcasing the tech for OEMs but as you suggested certainly not geared for actual volume production,.
So the question is: what actions need to take place to get this back on track. I was gobsmacked by Johnson's insuciant commentary banding about "single points of failure" as if this wasnt anything to worry about, after the furnace issue. And yet I recall a SPOF as being definied as something in manufacturing/process system that, if it fails, will stop the entire system from working.... and there it was in black & white.....wioth that fabulous adjective "insurmoutable" also allowed to pass the Board?advisers scruitny and make the trading update!
Fevertreeman
The fact that the Chairman has regularly bought shares suggests he has been naive to the pressures that Johnson has been under, and naive to the likelihood that problems occurring were inevitable..
With the CEO not being much of a share buyer suggests he ( being closer to the issues) has indeed been more aware...
Being almost forced to bring forward expansion plans as a rezult of orders, whilst still needing to focus on the inevitable problems of scale has actually made life harder for themselves, resulting in them , no doubt, taking their eye off the ball with regards the manufacturing detail...the late arrival of an experienced COO made that also...somewhat inevitable..
Firefighting and not sufficiently being able to stand back and manage the development is also a fault of the NEDs whose experience is there to advice of potential problems that lie in the roadway ahead
The sell-off may well include institutional investors who subscribed at 40p such a short time ago based on the same assurances as the rest of us. They have the resources to simply move on, unlike some of the rest of us!
The arrival of Maddock and Easton has (hopefully) ushered in an era of professional management sorely lacking in the core areas of manufacturing ops and finance. But it is not enough, we need a change at the top, and whilst in a larger plc Johnson would be out the door after the multiple failings of last 24 months, it is the Chairman that needs to go as he has failed to manage the CEO, failed to manage the board , and failed in his duty to represent s/holders interests.
All this dumping means that people close to the company are selling as well (id guess). Thats the concern here.
I think this has been oversold, volume of shares sold / bought in last few days vs number in issue 9 million vs over 240million in issue . I guess the problem is total uncertainty every time a production update comes out it is way down on previous estimates it was always going to be a problem ramping up production and until targets are set and hit or exceeded this share will be in the doldrums and cash raising is increasingly difficult as the share price drops either from finance houses or existing shareholders. Difficult to know whether to bail or cling on . The board needs to be honest and set realistic sales goals.
It seems to be stabilising around 11p now. I'm adding.
SP is in free fall
Completely agree - changes need to be made and quickly to assure the customer base & shareholders that there is not a systemic problem. That means (1) Replacing the chairman (2) Laser-like focus on operations, systems, people (3) getting finances sorted (4) recalibrating communications and making sure that we never have a repeat of what has been a disastrous string of announcements from Johnson.
Likewise fiah. Was fairly disappointed with the raise at 40p, so the thought of 10p or similar is a shock to the system. The thought I am clinging on to is that despite the poor management and, especially, the poor communications, the future of SCE arguably looks brighter than at any time, as long as they can truly get to grips with the manufacturing issues and that the confidence of customers is not irreparably dented. The order book and pipeline are strong and cash is depleted in part because of the delay in production ramp-up and in part because investment is being made in capacity for that order book and pipeline. Is it time to be greedy when others are fearful? The market cap is currently sub £30m, which is crackers. But then I come back to where I started. I also never foresaw this level of share price in any scenario other than a fundamental issue with the product, such as safety.
Never imagined SCE share price would get this low, bitterly disappointed, undecided whether to average down though, great product but what is happening with management?
No chance of an equity raise at 15p, that's over 10% premium to current SP and the markets are dire, particularly for those seeking capital raises with current interest rates. 10p more realistic and that's if the SP doesn't fall further
Hi Guys, Having dealt in Automotive for many years I can tell you there is zero chance of an automotive customer providing finance here, it would create far too many problems ethically in their supply chain and procurement functions. The only option is a equity raise hopefully at around 15p
Would an OEM really lend? .......... I think OEM10 is a possibility as they seem closer to the company than most standard business relationships. They were involved in solving the furnace issues and wanted ST to build their second production facility close to them in the USA. They now have £200 M in contracted orders with ST so the sooner the company is financially stable and able to focus on capacity expansion the better for everyone.
It's still on the watchlist for me because of the massive potential.
The funding is key imo. The capex loan seems likely to close shortly. But how to raise working capital?
Would OEM really lend? It would be a significant change of dynamic in what's basically a supplier relationship. Might they just change supplier instead (despite the exclusivity and rigorous process)?
If SCE raise, the SP will likely follow the price, even if it's small and to keep the lights on. Imo wait to see who'll back this and on what terms/price. That'll indicate how the market views the many potential issues here, surmountable or not. Then see where the sp settles.
Not long to wait.
Zeus has suspended forecasts because the ones they put out 4 weeks ago as house broker (guided by the company) turn out to be a pile of dung. Superlative management by Bundred and Johnson......
Surely this is a financial hic-up?
Its bleeding out.
The perfect storm of a raise looms.
Unreal, I thought this was a safe haven of sorts. I guess they dont exist.