Crystal Amber Final Results Statement13 Sep 2019 08:40
Allied Minds Statement in Crystal Amber RNS
Allied Minds describes itself as an early-stage investor in technology and life science companies. In 2014, it listed on the London Stock Exchange at 190p per share, valuing the company at £398m. In December 2016, it raised £64m at 367p per share. Since its formation, Allied Minds has invested in over 40 companies. In 2017, it discontinued funding of several portfolio companies in order to focus primarily on its six largest remaining portfolio companies. From 2014 to 2018, Allied Minds reported total operating losses of US$464 million.
The net asset value of Allied Minds now comprises four significant technology and space-related investments, two life-sciences investments that have been substantially written-down, four small new investments made since 2017, and a cash balance of around US$25-30 million after two recently announced follow-on investments. Based on the disclosure regarding individual investee company holding values, we estimate that Allied Minds’ net asset value currently stands at between 95p and 105p per share.
The Fund initiated an investment in Allied Minds during autumn 2018 and currently owns 6.9% of its issued share capital at an average cost of 60.6p per share.
Following the Fund’s investment, concerns were expressed to the company regarding its excessive parent company running costs and the urgent need to realign its cost base. The Fund also objected to elements of the management’s compensation, specifically the long-term incentive shares that had cost around US$3.9 million during the first half of 2018, and also the unprecedented practice of paying out 10% of gains arising from any successful individual investment independent of the scale of losses incurred on other investments in the portfolio (the “Phantom Plan”).
Notwithstanding the recent positive news regarding HawkEye 360 and Federated Wireless, the Fund notes that the share price of Allied Minds continues to trade at a very material discount to its estimated net asset value. The Fund attributes this to the continued excessive level of central operating expenses for a company now in run-off where four investments plus parent-level cash account for more than 90% of asset value and the board’s failure to cancel the egregious Phantom Plan that ignores all portfolio losses when calculating management bonuses.
The Fund believes that the scale of share price discount has not been addressed by the board of Allied Minds and therefore intends to take appropriate action.
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