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Bushy,

1. You refer to an event from 3 years ago. How is that still relevant for the prospects for JLP in 2024? Help me understand your logic that cashing in some shares 3 years ago in lieu of salary, therefore makes this a red-flagged horse manure today? (Brown flagged probably). Because I'm struggling to see any logic in your reasoning.

2. The options for both were "in lieu of amounts owed for remuneration." and "in lieu of cash payment for salary." - as clearly stated in the RNS. Do you not understand that start up business owners sometimes not take salary for a period to help grow the business? Then take one, when the business can afford it.

3. Colin Bird is irrelevant anyway in 2024.

4. Leon has purchased twice (at market price not at an option price) since then and has plenty of skin in the game as does Colin Bird's successor.

5. All exercised options and share-based compensation is always dilutive - so not sure why you say "PS those conversions were dilutive" either.

Feeks

Is it guesswork? Or interpretation? In the commercial world 3000 units isn't a high volume OEM relationship. And 3000 AFTs simply doesn't utilise the capacity at Sunderland. I don't know about your commercial experience but I do know Tony Gott has vast commercial experience and wouldn't use those words loosely - it would make him look silly if he did.

Let's rewind. Those calculations were to try to ascertain the validity of your alternative theory regarding the Going Concern. So you're pouring cold water on your own theory now.

The RNS relating to the 3000 for Ayro from 03/04/23 states:

"Delivery of eDrive systems to commence in Q3 2023 and production is expected to take place in batches, with the final batch scheduled for delivery in Q4 2024" it continues "the Company is hopeful of securing follow-on orders upon delivery of the first 3,000 units." So nothing in my interpretation contradicts that RNS does it?

By the way FY2024 Q4 is Jan-March 2024, not Oct-Dec - as you believe; Saietta's Y/E is March.

Feeks,

I hadn't thought of it that way but yes I see your point. Funding the JV (Saietta VNA) is a strategic priority but not a strict necessity.

But logically following this thought to fund 12 months (to September 2024) of cash burn (i.e. overheads @ £1.2m a month means earnings growth from Sunderland (alone) must be around **£5m higher** than my gross profit forecast (ex.VNA) because past March (to September 2024) there's a further £7.2m of cash burn, and while potentially up to £5m of "avoided" funding of the JV - assuming no funds have been committed (which is highly unlikely). And £2m less income through the sale of assets (the 2 Sunderland lines transferring to VNA).

So Sunderland would have to be producing/selling AFTs at a much, much higher rate. I've plugged these variables into my profit model and my calculations come back that Sunderland would have to be producing, selling and getting the cash in for at least 1,500 units a month from today, to have enough cash until 30/09/24. Or 2,200 units a month if say half the VNA cash has already been committed (£2.5m). (based on £2,500,000 / £400 margin per AFT = 6,250)

I think it highly unlikely the Indian JVs would be buying engines from Sunderland if SED reneged on the JV, and it assumes there are no cost penalties to reneging - which I also think unlikely. It would likely need for Ayro's "full production" to advance extremely rapidly in early 2024 as explored in Sed-ition-part-4 then this could hoover up many or all of those AFTs.

https://theoakbloke.substack.com/p/sed-ition-part-4

So to conclude, the likelihood of SED binning its VNA JV being the explanation for the Going Concern statement is far, far less likely, but I concede it could be a theoretically possible explanation.

Continuing:......

The comment "I have no idea whether the product is any good or not. That’s largely irrelevant to me" at least confirms there was no real analysis given beyond a view of the H1 numbers and was made in the absence of any real understanding of the market opportunity for SED and its future prospects. The value of a market opportunity and the strength of the proposition largely determines its success - and its ability to get funded. So largely irrelevant? Anything but, in my view. I'm not trying to be overly critical - it must be hard when they cover 100s of shares - how can they possibly get a detailed understanding of a share like SED?

Finally it is true that the funding round was at a 17% discount, and that this diluted SED holders. Will the further funding be a further funding round with further dilution? Maybe. But we also know SED has at least one funding option already in place. How?

The fact that SED did NOT include a going concern statement in its interim is significant. This means there's one or more offer on the table. There must be - otherwise they couldn't have made that statement. So when Stockopedia say:

"I challenge whether this statement here below is true, as it doesn’t align with the facts."

Leaving aside the allegation being made here that SED (and its NOMAD Canaccord Genuity) have lied, I would say this is Stockopedia's misunderstanding of the meaning.

If there's a funding offer on the table then it is also a fact that their comment that "funding runs out in March" is ALSO incorrect. (Whether the terms on offer are any good is another matter - but we know it must already exist).

I notice you repeat the mantra they themselves give - that "it is uninvestable".

Is it though?

PS A final thought. Does their StockRank system prejudice the assessment given? Isn't it inevitably yes otherwise wouldn't the StockRanks system otherwise be incorrect and worthless? In other words because SED had such a low score it must be in line for a harsh review. It's what's known as confirmational bias. So watch out! You could be vulnerable here, to further de-ramping from paid-for commentary.

PPS would 5 x OEMs and their due diligence not have considered funding? Would several OEMs plan the manufacturing of multiple vehicles using SED as a supplier if there was a question mark? Would several OEMs JV with them? I think it inconceivable why anyone would think there is not a funding plan in place. Once a manufacturer commits to a supplier they can't just swap out a Saietta motor for an alternative on a whim. That's what Buffett would call a moat.

Taltbong

I read the Stockopedia assessment too. I suppose you have to decide whether the following comments are fair:

1/ "no discernible commercial progress apparent" is fair when there's a $366m order book - and growing.

2/ "seems to limp along" is fair when this IPOd just 2 years ago. In those 2 years they've commercialised both AFT and RFT motor technology, inverter and software into multiple products, one which outpaces at least one global Car Manufacturer's own electrical motor, for both the heavy & light automotive and marine markets - where its Propel offering also outpaced the incumbent. Furthermore it has bought and kitted out 2 factories for automated production from 2024, and persuaded 2 Tier 1 OEMs to JV with them, and at least three major OEMs to buy from them (so passed due diligence at leas5 times - which in the automotive world isn't easy), persuaded some really senior people e.g. the ex-CEO of Rolls Royce and Bentley to join them.

Because in my opinion SED have achieved a great deal. I think it is fair to say the previous CEO overcommitted. However, the rapid and skillful way that's been dealt with since April 2023 is also impressive.

TBC.....

Https://theoakbloke.substack.com/p/happy-christmas-reader

https://theoakbloke.substack.com/p/sed-ition-part-1

https://theoakbloke.substack.com/p/sed-ition-part-2

https://theoakbloke.substack.com/p/sed-ition-part-3

https://open.substack.com/pub/theoakbloke/p/sed-ition-part-4

Https://theoakbloke.substack.com/p/happy-christmas-reader

PWA2477,

Well it might have been worse. He might have lost all credibility just by spelling the word credibility wrong.

The evidence for it being Pepsi is well documented in this article:

https://theoakbloke.substack.com/p/microsalt-part-of-tek

But even if it is not Pepsi the fact is it is a Fortune 500 "leading snack food company". See Tek's RNS 22/12/23:

"MicroSalt recently received wholesale orders from two Fortune-500 companies, one a leading snack food company and the other one of the world's largest pharmacy/food retail chains. Additionally, the company is engaged in late-stage supplier discussions with other major snack food brands which the company hopes to announce in 2024."

Take your pick: General Mills, Tyson, Coca Cola, Mondelez, Pepsi.

Source: https://fortune.com/2015/06/22/fortune500-food-beverage-tobacco/

Pepsi operates extensively in LatAm where the customer is baesd and has a high stated ESG priority to reduce sodium.

Bear in mind too, The Oak Bloke correctly anticipated that customer A in the prospectus was CVS Health, another Fortune 500 company with 9,500 stores.

GLA

Hi Damofarl,

That was an interesting article.

It contrasts with the article I included in my FAIR article, here:

https://theoakbloke.substack.com/i/140055091/so-clos-are-bad

https://blog.clarion-capital.com/clos-endured-the-great-financial-crisis.-will-clos-suffer-the-fate-of-cdos-in-the-next-one

The reconciliation in my mind is that general debt default levels doesn't equate to CLO default rates due to overcollateralisation, diversification and active management a CLO manager conducts on our behalf.

I hope I've done justice to FAIR. As I say in the article it was a tricky one to cover, and not to fall into the "it's complex therefore it's very risky, therefore impossible to write about" narrative I've seen in other articles. Nor did I want to leave it at "take the yield and hold your breath, it's been ok so far".

TMT is one of the Top 20 ideas for 2024:

https://open.substack.com/pub/theoakbloke/p/happy-christmas-reader

https://open.substack.com/pub/theoakbloke/p/delivered-via-tmt

Tek Capital & Belluscura are two of the Top 20 ideas for 2024:

https://open.substack.com/pub/theoakbloke/p/happy-christmas-reader

Belluscura is one of the Top 20 ideas for 2024:

https://open.substack.com/pub/theoakbloke/p/happy-christmas-reader

Merry Christmas to all BELL-ies! A brighter 2024 ahead.

https://open.substack.com/pub/theoakbloke/p/ding-dong-news-from-bell

Merry Christmas to all TEKkies. A brighter 2024 ahead.

https://open.substack.com/pub/theoakbloke/p/ding-dong-news-from-bell

AceofClubs,

wells are capped for only 2 reasons. Safety and Exhaustion.You say Dec have "Miniscule Resources" - you simply haven't done the maths have you?

70,000 wells and a capacity to retire 450/wells a year over the next 72 years of course means at some point in the future they have to 3x their operation (or more than 3x if they keep helping State Jurisdictions with their orphaned wells). But they've 10x the capacity of their NextLVL operation over the past 2 years - so what is actually the concern? In 2024 will they actually have more than 450 wells exhausted or with safety concerns? I doubt it, but if they do they'll increase the capacity of NextLVL.

This article explains it further for you:

https://theoakbloke.substack.com/p/dec-tecting-fact-and-fiction

To quote "DEC bought and operate an explicit well retirement business called Next LVL. It operates as a standalone business and competes to win work - and has won work from 3 US State Plugging Operations. Next LVL has expanded capacity from 40 wells/year to 450/wells in the past 2 years. To plug all 70,000 wells in the next 75 years suggests they will have to increase capacity by 2-3X but having proven they can increase by 10X in the past 2 years is this actually an issue? Also later on, I explore some of the reasons you WOULDN’T want to merrily plug lots of wells - at least not yet. We will explore reasons like workovers, shut ins and Carbon Capture."

And so tonight it erupts in Grindavik

https://apple.news/A3_WGsFr4T2mN6GGScgJi5A

Hi Damofarl, I'll definitely be including CGEO in my Top 20. Thank you for mentioning this one.

Hi Gavster, I think speaking to a percentage decline with DEC kind of misses the underlying point. It's true the decline occurs in a steady state of around 10%. But that's not a 10% decline of the resource. It's a 10% decline in the current method to extract the resource. So if you factor in shut ins, work overs, compression, pumps and other techniques (and these are evolving year after year) then DEC have proven that 10% isn't a steady state - albeit there are costs to doing all of the above.

The better way to think of DEC is in terms of reserves and in terms of recognition of depletion. It's on the balance sheet and then it flows to the P&L as cost. On that basis the depletion is nowhere near 10%

If we take H1 2023 accounts, Natural gas and oil properties, net are $2,690m on the balance sheet and Depletion is $87.5m in the P&L. So one divided by the other that's 3.2% (per half year). And the numbers inverted show there are 15.5 years worth of production assuming a steady state. But of course the flow rates will decline which is how DEC arrive at the year 2095 for last production..... So I disagree they'll run out by 2030. Assuming of course the engineers reports are accurate (these are audited yearly) and that the depletion cannot accelerate between now and then. (Nice problem to have!)

I hope that helps explain anyway.

Https://www.fairoaksincome.com/~/media/Files/F/Fair-Oaks-IF/Fair%20Oaks%20Income%20Fund%20-%20Nov-23.pdf

Interesting to see the discount to NAV now only 5.86%. That is much reduced.

NAV return for the year 14.16%

Defaults are rising but the level remains manageable and below cushion.

The volcanic eruption risk appears to be diminishing.... magma heads to a vertical intrusion to the south near Grindavik which is away from Verne.

https://www.newsweek.com/iceland-volcano-update-magma-pools-svartsengi-power-station-1852750