Member Info for Lending

Sheltie - I don’t disagree - few punters will be wanting to buy in this climate and some of the original investors will still be wanting wanting to sell and move on to pastures new (e.g. Summit); or employees wanting to sell to raise some cash. The SP will continue to bounce around in these choppy seas for some time yet IMO, so unless one is trading, it is best to ignore the day-to-day fluctuations of the SP. The best those of us who are long term investors can hope for is that the fundamentals - the money making factors - of the company continue to progress favourably. As others have recently pointed out it is these factors we should be focussing on, as, In my opinion, the SP will in time reflect those fundamentals. The question still remains, however, whether DT has a long term competitive advantage with its unique technology over its competitors as the field is crowded. I remain optimistic that it has.

A FT article “Reasons why the tech stock crash may be far from over” in the HL site is worth a read. One aspect, mentioned in the article, that continues to concern me with share schemes in these high growth companies is their high cost to shareholders that are not accounted for in the normal accounting metrics - but would, if calculated correctly, be reflected in Free Cash Flow numbers. Very few high tech companies, DT included, report these.

Just to add to my previous comment, and to demonstrate better the importance of revenue growth on the intrinsic value of a company, I have calculated how, say £100 of revenue, would look in 5 and 10 years at different rates of growth. Of course it won’t exactly turn out like this in practice and very high growth rates won’t be sustainable over the longer term.

At 8% growth rate, £ 100 will tun into £147 in 5 yrs and £215 in 10 yrs.

But a 50% growth rate £100 will grow to £759 in 5yrs and £5766 in 10 yrs. Quite a difference I suggest. Einstein suggested that compounding was one of the wonders of the world!

For this reason, I think it is difficult to compare the value of different growth companies without a view as to their future growth potentials. And, of course, there would be a lot of uncertainty associated with this - but this is what makes it interesting.

Earlofaim - for high growth stocks, yet unprofitable, I wonder whether comparing current metrics like PE ( negative for loss making companies) or revenue to market cap has much relevance. For these companies it is all about comparing projected future free cash flows IMO - largely determined by revenues and costs. As Bacchusll points out, a company growing its revenues by 50% pa, and increasing, is quite a different animal from one growing at 8% pa.

While the company fundamentals are going from strength to strength, I think the SP will still encounter headwinds this year because of sales by the original VC investors and the current investing climate where growth stocks are out of favour.

Summit (14.5% of total) KKR (9%) and Vitruvian (3%) will still be looking to sell and AB (9%) maybe as well. Also some of the employees (11%) may still want to exit at a more favourable price after the SP fall following the announcement of the Placing. Had I been an employee wanting to sell some of my shares, I would have withdrawn from the placement after the resulting SP fall and taken my chance on the market at a later date. I suspect some will be doing just that.

Eventually the SP will reflect the intrinsic value but not yet I suspect. It would be good if I am wrong.

If I recall correctly Poppy had only about 2m shares so10% of that is not too significant in MHO. Still a little baffling that this was handled in this way.

On the other hand we should not forget that most those employees not participating in the placement can still sell in the market at any time from now on. I am not sure how many of these are affected by a closed periods.

There we go but only one third of what they thought may have been the case or 7% of the shares employees hold. Good news.

Shares - See RNS below. Que Sera sera.

On 1st May 2022, the post-IPO lockup on up to 85.5 million shares, held primarily by current employees, is scheduled to expire. To help facilitate an orderly sale of such shares, eligible shareholders will be offered the opportunity to participate in a placing structured by way of an accelerated book-build (the "Placing"). It is expected that Jefferies International Limited would act as Global Coordinator on any such Placing. To accommodate available trading days around the UK May Bank Holiday market closure, the lockup may be terminated shortly prior to its scheduled expiration. Accordingly, the Placing may occur before 1st May 2022.



It is currently expected that the Placing will constitute no more than 20 million shares and any early release from lockup will only be in relation to the shares offered in the Placing. Any Placing will be subject to, among other things, sufficient employee shareholder participation and market conditions. There can be no assurance as to the precise timing of the Placing, if it proceeds at all, or the volume and price of shares that will be available.

I thought 25% of 85.5million shares so about the 20million shares they suggest. Once over, we move on but Summit, KKR and others will also be wanting to exit in the not too distant future as well. I expect a bumpy SP ride for some time yet but remain unfazed by it. I still believe in the fundamentals and I don’t think that the increased liquidity is a bad thing in the long term.

Charles. If I were a young - the employees mostly are - and obtained my shares cheaply through the pre-IPO Share Option scheme, I would be looking to sell at a still good profit as there would be many reasons for wanting the money at a young age. I would also be aware that I would probably soon be awarded new share options that may have exercise prices in line with the secondary placement price, or lower, so there would be the possibility to take some advantage of any later upswing in price.

For this reason I will not at all be surprised if there is the 25% uptake considered.I would have at a young age when any spare cash was in serious short supply and demand for it great (house, car, family, holidays….)

I expect SP volatility for some time and least until the likes of Summit and KKR have exited and employees who want to have liquidated their awards. But to quote from Abraham Lincoln, ‘‘This too will pass”. It is all part of the investing game.

I like the quotes from B Grahams’s book The Intelligent Investor.

“Often Mr Market lets his enthusiasm or his fears run away with him, and the value he proposes seems a little short of silly” and
‘ At (such) times an investor will do better if he forgets about the stock market (SPs) and pay attention to the operating results of his companies”

The merit or otherwise of a secondary placing of employee shares is not that straightforward in my view (see below): and I think they would have had to announce the placement in advance as they will have needed to consult with their employees prior to the placement and a leak would have been inevitable. I guess a bear raid, or fall off of the SP, was an inevitable result for a company dependent in value on future earnings- and only illegal both in the UK and the USA if there is collusion. In my view, whatever way it is handled, the end of lockup of employee shares ( about 12% of the total) was always likely t lead to some short term volatility. And as a long term holder and co-owner, I only care if it affects the reputation of the company or leads to a takeover below my estimation of its intrinsic value that is in the 800-1000p range.

This is what what one advisor says regarding the merits of employee share placements.

Quote
Making it possible for employees to sell shares without restrictions isn’t an option we advise. It can serve as a distraction: What if all of your employees start keeping daily tabs on the current price per share of their stock? What if they start asking for company information that it doesn’t want to provide and potentially feed to prospective buyers? What if they sell to competitors?

It can also create some unwanted chaos. It can affect the company’s options pricing. Companies are justifiably uncomfortable with all of those things.
Unquote

PD- The price will not be announced in advance but will be determined through an accelerated bookbuild process. See below an extract from one of the earlier RNSs concerning a Secondary Placement Of DT’s shares by some of the original investors. The resulting price will probably be at a discount to the closing price on the day of the placement.
Quote
The price per Placing Share will be determined through an accelerated bookbuild process. The bookbuild process will commence with immediate effect following this announcement and may close at any time on short notice. A further announcement will be made following the completion of the bookbuild and pricing of the Placing. The timing for the close of the bookbuild and the distribution of allocations will be at the absolute discretion of the Joint Bookrunners. The Company is not a party to the Placing and will not receive any proceeds from the Placing.
Unquote

GF - I used info from Market Screener that is seemingly incorrect. So you are right that net profit is negative FY22 For CRWD - but they also. Report a positive Free Cash Flow of $441m for that year that Buffet and others regard as the most important non GAAP evaluation metric of them all (Cash that belongs to the shareholders (Owners Funds)).

GF. I’m not convinced that the quarterly update expected next week will say anything about profit - their quarterly updates havn’t in the past as far as I recall.. The HY and FY results, on the other hand, do. The quarterly updates only give only info - I believe - on secondary indicators like customer numbers, revenue, ARR, churn rate, EBITDA etc. and some outlook on those numbers.

Unlike SentinelOne, I thought Crowdstrike was now profitable with a high cash conversion rate to Free Cash flow ( See e.g. Market Screener). Darktrace was indeed profitable for the first time in HY22, but how this translates into FY22 we will have to wait and see - all in IMHO.

Berylfu - it is indeed an unusually high amount for the auction- - about 2% of the total number of shares. It probably involves one of the top 10 holders selling ( Market Screener lists them). The less goood news is that it is probably by one of the original investors who are in the know. The good news that there others willing to buy those share at that price.

The original JV investors will be wanting to sell somerime as that is what they do - invest early, create a liquidity event and then move on to the next exciting prospect. It is well worthwhile, for instance, looking at Summit’s web site to see their history in doing just that. It is a case of when they will sell - not if they will sell - so must expect it.

Didi888 - It is an auction so it could be any number of players and there will be an equal number of shares bought and sold no matter whether it is tagged as a “buy” or a “sell”. If you look at the auction results (UT) posted between 4.35.00 and 4.35.30 each day they are usually for either £1, £2, £3 or £4MM worth of shares traded in the auction. Why such an exact value beats me as one would logically expect the value to be random.

CR888. I don’t know if MTL Is a relative or not but American I think; and the other is a US based wealth manager

Apologies if posted already.

According to Market Screener there are two new SHs in the top ten which might explain some of the share buys/sells in the last few weeks. No further chance in the other top ten past from the AB recent sale.

Michael Thomas Lynch ( not our Michael Richard Lynch) 3.3%
Raymond James & Associates 2.93%

I was hoping that we would see an operating profit (EBIT) but to also to achieve positive Net profit (E) is outstanding. And we are lowly geared (low borrowings) compared with the likes of S and CRWD so very robust.