Member Info for RWT2

I'm figuring these must be fat finger errors / lack of understanding on the part of those exercising warrants. Bear in mind ANIC has a high percentage of retail investors (i.e. may not have ready access to great advice on what they are actually buying).

Hi - I didn't intend that my last post was disrespectful. It was to highlight that your own investment portfolio (or proposed investment in Rolls Royce) is a really good demonstration that "ethical" investing is hugely subjective and I don't think it will be the tipping point for this share.
Re. the possibility of localised supply chains, I don't know if that's the case as I don't know all the ingredients. What feeds the mush? I assume you add some form of carbohydrates? If these are grown, then where are they grown? What fertilizers are used to grow them and where do they come from? Where does all the processing equipment come from. I will guarantee you on that latter point, very little will be locally sourced (unless you are German!).

idg69 - I've challenged this before and will make another observation on the same topic. I think your emphasis on the ethics side of this investment is one of the weaker arguments supporting the investment case. There is nothing stopping someone who has ethical concerns over farming techniques from switching to a vegan diet right now - alternatives are available. If they can't be bothered because they like meat/dairy too much, then does that not reinforce that the ethical argument is comparatively weak? Most people do not feel as strongly about this as you do and effectively calling farmers poor simple people who just don't know how evil they really are (I paraphrase and exaggerate of course for dramatic effect) is probably not the approach that will make this investment take off. Ethical arguments are rarely as black and white as you present them on this topic and I don't think it's the case that once that particular penny drops then the dairy industry will collapse. I do find it a little strange and inconsistent that you rile against animal cruelty and the money that supports some current farming practise but you have no problem investing in Rolls Royce who supply (or certainly have done in the recent past) engines for military aircraft used by Saudi Arabia to bomb Yemeni kids (and setting aside the fact that nuclear power is not universally popular!). Your comfort with this doesn't make you a bad person. Umpteen shades of grey I'm afraid. Your valid concerns are just another strand to the investment case, but I do think it's one of the lesser strands.

Bluehorseshoe - Shhhh! Comrade. Don't question the wisdom of our dear leader. He is always right and is worth every penny.

I don't have access to the Times article so perhaps it sheds some light, but a couple of possible reasons this might not be all that bad:

1 - I suspect dogs aren't as discerning as people. Getting the meat texture and structure to resemble that of a fillet steak isn't so critical and I wonder if that means some of the processing steps can be short-cut or eliminated entirely and these might be expensive steps in e.g. steak production.
2 - Pet food sales may be "stickier" than food for humans. For you and I we may decide to purchase a cultured steak once to try it, but we will have a pre-conceived very high standard which the steak needs to meet. If it doesn't hit that standard we are more likely to say "tried it once and never again". For pet food, so long as Shep / Rover / Sir Woofalot actually eats it happily enough then you won't get terribly much more sophisticated feedback. The pet owner will then feel vindicated in their decision to purchase the cultured pet food and continue to buy.

I think the investment was only small in any case.

AgroFan - My interest is that as a shareholder I want to ensure that the board are acting in all shareholders interests and not just in Jim Mellon's interest. Do you not share that view? Are you seriously telling me you are entirely happy that JM took home £7.4M in 2021 for a company with a market cap of ANIC's? That's about triple the average FTSE 100 CEO. It's reward for short term gain when the proof will not be in the pudding for several years to come. I find it astonishing that you think this pay award is preferable to other pay models or if operating along these lines that there was not caps or other limits put in place. I find it astonishing that you do not think small shareholders should question this and question whose interest the company is being run in. I may strike you as being discouraging to others - you strike me as being completely disinterested in how the company is run.

A few posts back I was corrected that the 15% fee due to Shellbay was maybe not as bad as I had presented. For clarification, exactly how it is worked out is not especially relevant. The absolute value (relative to the market cap of ANIC) is undeniably huge and does support the question mark over governance and I stand by my comments that it is an excessive reward for short termism. It is absolutely not a good deal for the average shareholder. Extract below from RNS dated 16th December re. financial results:

Financial Review

The Company recorded a net operating profit of £9,743,418 for the year (2020: £551,173), prior to accounting for the Shellbay fee due. Taking into account a fee of £7,394,360 (2020: Nil) due to Shellbay and an irrecoverable VAT charge on Shellbay fees of £1,478,872 (2020: Nil), the Company incurred a net profit after taxation of £1,019,841 (2020: £611,731). Our investment income, including net unrealised gains, reflected a gain of £10,669,991 (2020: £656,377). Following the amendments to the Shellbay Investments Limited ("Shellbay") fee agreement, a fee of £7,394,360 was recognised at year end. The calculation of the fee payable to Shellbay based on this agreement, is detailed in Note 2 to these accounts and is calculated as 15% of the increase in the Company's audited Net Assets pre-fee deduction for the period 1 July 2020 to 30 June 2021. For the year to 30 June 2021, this figure is £8,215,956. Shellbay has elected to take its full fee in shares and, as a gesture of goodwill, has also agreed to contribute £821,595 towards the irrecoverable VAT potentially due on this fee.

Bluehorseshoe - Counter-response as follows!!
1 - I stand corrected and should have read the detail more thoroughly. OK, so not as bad as I thought but 15% is still steep.
2 - Agree it was fixed for the 2nd fund raise but I don't think this was a forseeable problem 1st time round and they chose to ignore their 3rd largest shareholder.
3 - I think you are giving them too much of benefit of the doubt that they reacted to positive share price momentum. Never having been involved in the process of raising lots of cash I don't know how long it takes to plan and execute this, but I don't believe it was a spur of the moment response to rising share price.
4 - I don't think the FCA will pay too much attention to ANIC. Look at the likes of NMC Health.
5 - I think we agreed on something.

Keep saying though. You've got to be in it to win it and there aren't terribly many alternative options out there.

Dazzle345 - here's a starter for 10 on governance issues:

1 - Agreeing to a 15% fee to Jim Mellon based on increase in NAV a matter of weeks before he achieved a £60m uplift in NAV by raising cash. Reward for short termism in a long game industry is hardly inspiring.
2 - Excluding Hargreaves Lansdown customers from participation in the aforementioned cash raise, basically saying "up yours" to your 3rd biggest shareholder.
3 - Suspicious to the point of almost certainly being unethical significant rise in share price immediately before a funding round was announced (this happened at least a couple of times over the past 12 - 18 months). My take is that those in the know were able to manipulate price upwards for short term gain whilst the little guy got shafted.
4 - Definitely some question marks re. the relationship with Jim Mellon's unlisted private equity company (whose name eludes me right now). There should probably be more clarity re. who is paying for what between the 2 very similar companies with JM at the helm of both. Are ANIC shareholders paying for all the research whilst the unlisted company gets a free ride? This is just a question of clarity, but that relates back to governance.
5 - JM has made some sweeping, hyped up, unsupportable statements along the lines of "there will be no dairy industry in 10 years". That's almost certainly just wrong and just sounds like hype to boost share price. I would rather we have actual progress with defined milestones being hit to firm deadlines and the share price will then rise in line with that but will have a firm basis for doing so.

There's probably several more.

I would concede as a starting point that I have not read the Cenkos report. As a general observation I would query how you apply a meaningful valuation to a basket of companies with no current revenue streams and with no proven market. There is a prediction of a significant market in 10 or so years time and that's where "expertise" falls flat on its face. Have a read of Superforecasting by Philip Tetlock. Most professional analyst predictions of future outcomes are no better (and can be significantly worse) than a reasonably well educated, reasonably well read laypeople. Without having read the report, I'll go out on a limb and guess that there was some form of incentivization for a positive report. I'll also say with near certainty than there will be zero consequences for the analyst if their prediction of market valuations based on baked in future growth prove wildly inaccurate. No one will hold them to account in 10 years time when it all comes out in the wash.

Admiral - my original post contained a link to the basis of the statement re. missed targets. See again:
https://rethinkpriorities.org/publications/cultured-meat-predictions-were-overly-optimistic
If you go to that page there is a further link titled "check our dataset". You can read all the statements there. There are several statements from the leaders of companies ANIC are invested in promising to have products on the market already. I'm still waiting....
AgroFan - I absolutely do believe my statement that the valuation of the average CellAg company is optimistic and a decent proportion of them will fail in the next few years returning zero. This is not unique to this sector and is well documented. Something like only 25% of companies survive beyond 10-15 years. Given that is the timescale generally touted as being the point to which this industry really takes off it seems statistically inconceivable that ANIC's selections will beat that benchmark by much.

Admiral70 - your key comment was "if all goes to plan" and the basis of the article I posted was the industry as a whole has a long and glorious track record of not delivering on their optimistic predictions.

Not sure that anyone should say with confidence that the S.P. should be at strong premium to NAV. Moderately interesting and kind of balanced article at the following link:
https://www.thegrocer.co.uk/future-of-meat/is-cultured-meat-pure-science-or-a-billion-dollar-con/665494.article
A couple of takeaways from this:
1 - The industry as a whole is making lots of predictions re. what they will achieve and how long it will take to achieve it and they are consistently missing these targets. That doesn't bode well for cost / programme control and this over-confidence combined with underachievement is a significant factor in why most start-ups fail. The supporting information behind the articles comments re. missing targets is from the following report (you can follow a link on this page to a spreadsheet of what predictions have been made - these include many of the top names in this field): https://rethinkpriorities.org/publications/cultured-meat-predictions-were-overly-optimistic
2 - Many of the companies do not have the right balance of academics vrs. industrialists. This rings true from my own experience. I have been involved in 2 major industrial engineering projects (multi-million pound) with university spin-offs and both have been absolute car crashes. The academic guys were indeed very clever and would make things work, but they had no concept of design for manufacture, cost control or programme. Not hitting milestones was not important to them as long as it was technically correct. But that doesn't make a viable business.
3 - Overarching takeaway is that you shouldn't have a fear of missing out. This technology is years from competitiveness. You comfortably have at least a year or 2 to sit back and watch developments without overcommitting to investing. I'd invest a small amount now and accept that perhaps in 2 years time you walk away completely or add more accepting you may have missed out on a modest gain in the intervening period but knowing there is still plenty of time for big gains in years 3 - 10.
None of this supports SP trading at NAV right now as the stated NAV's of investee companies has a lot of optimism built in (some/many/most will fail and be worth zero).

Jim Mellon says the current conflict and restriction in supplies from Ukraine and Russia is good news for precision fermentation. As of 5 minutes ago, I have just received the following comment from one of our suppliers in relation to stainless steel (all the precision fermentation tanks will be stainless, as will associated product piping):

"The Nickel market was closed this week as the price was rising so fast and the world has gone into panic mode, deliveries of material are being pushed out and prices have risen significantly"

Do not believe everything that Jim says!!

Part of my point was it is difficult to divorce yourself from the global supply chain and only limit yourself to friendly countries. Doing so may be double the time and 10x the cost and even then you may not be fully divorced e.g. stainless steel from European foundry doesn't have all the iron, chromium, nickel and manganese etc. mined in Europe. With regards to timescale, it all depends on nature and scale of project. Take Upside Foods new facility which is currently capable of 50,000 lb per year but could scale up to 400,000 lb per year in future (and that is really not much). Construction phase started in September 2020 (but design and planning would have been months and years before that) and it was opened in November 2021 which was apparently on schedule in spite of Covid. I am not sure if that is a fully commissioned status - that might take another several weeks or couple of months again depending on scale.

Admiral70 - Your comment re. much less issues on supply chain and logistic going forward is not correct. I work for an industrial engineering company who supply, install and maintain processing equipment used in the food, pharmaceutical and petrochemical industries. We operate almost exclusively in the UK but supply chain is global. The UK has no meaningful manufacturing base and the overwhelming majority of our suppliers are European headquartered and their subcomponents come from all over the place with a large percentage from China. On a recent job the end user applied a requirement for all pressure retaining materials to be European sourced - this was a nightmare on a variety of levels. Lead times could double (and I don't mean from 1 to 2 days, more like 10 weeks to 2o weeks) and some prices went up by a factor of 10. Not only that but because our suppliers supply chains were not set up to deal with European component manufacturers and foundries etc. several of them made a complete mess of this and ended up with sub-standard materials. Go watch an episode of BBC's Inside The Factory for a typical food processor or manufacturer to give you a bit of an idea of what a large scale precision fermentation facility might look like. Look at all the equipment and look at all the raw material inputs coming in to make their product. Global supply chain is absolutely critical to that. There are almost no vertically integrated large scale manufacturers out there. This is also why I have a beef (pun intended) with Jim Mellon's comments re. supply chain issues from Russia and Ukraine being good for ANIC. It might be, but I think each individual company would need to drill down into their supply chain costs to establish this and there is no way Jim Mellon has done this. Costs will be going up - that is 100% guaranteed. Supply chain issues will be more problematic - also 100% guaranteed.

So now for my typical counter argument...
Nickel prices up about 90%. Nickel goes into stainless steel (albeit tiny quantities) and stainless steel prices I believe up about 25% this month. All the fermentation tanks and piping etc. will be stainless steel (have a look at the videos of Upside Foods new production facility - it's all stainless). I've not checked other commodity prices but given my best performing investment over the past month is TB Amati Strategic Metals Fund (up about 20% in a month) I suspect the cost for building any new facility that contains various industrial metals for equipment and wiring will be rocketing. Bear in mind it cost Upside Foods about $50M dollars for their facility capable of an equivalent output of a few dozen chickens per day. Also bear in mind that the production process is temperature controlled i.e. requires energy (cost going up) for heating and cooling. Availability and lead time of previously off the shelf items has also been pushed out due to Covid and now restriction in major shipping routes due to closed airspaces and ports in the Black Sea. The nutrients going into the fermentation mush are also presumably grown somewhere so I assume are also affected by rising conventional farming costs. All in all, I am not at all clear why a general rise in commodities and restriction in supply from Russia and Ukraine is in any way good for ANIC. The cost of doing business for pretty much all of the companies we are invested in is going up - someone needs to explain to me why this is good.

Admiral70 - I fully intend to hold (as this only forms a small part of my portfolio), but I think people do need to reassess whether the narrative is changing. Governments around the world will begin to look at how self sufficient they are in crisis scenarios. Food security will be one of the issues. Is a highly technological solution to food security the right answer, or is it back to basics and promoting high quality locally grown locally sourced food combined with better land management. It doesn't mean the fundamentals of animal cruelty, emissions, land/water use, antibiotics etc. has changed but these may become secondary to ensuring security of supply.

Oogleflugal - I have to confess I'd forgotten a chunk of the current NA is still cash, but the general comments on share price are only odd if you believe the world will be the same place this time next year and I think that is by no means certain. Will it be a "day after tomorrow" scenario? Probably not, but it's not at all unusual for funds to operate at big discount to NAV and if current events escalate further then for speculative "jam tomorrow" stocks, people may begin to fear they won't get any jam at all hence the potential for share price to be at significant discount to NAV. Inflation could also have a lot further to go, having an adverse impact on that cash pile.

I don't realistically believe it will drop to 0p, hence the qualification that it depends on how bad the current situation gets, but a business startup failure rate of 75% is about the norm. In troubled times it could easily be worse and those that remain may be priced at a heavy discount to NAV (50%+?) because they are speculative and unproven and require lots of financing to get to completion in an environment where financing may be hard to come by. Can't be ars*d doing the arithmetic but I guess that will be well below 10p. Even I might top up some more (if I'm still here hahahaha) if it gets to that level. Best wishes to y'all.

Depending on how bad all this gets, clearly the only lower limit is 0p!