Member Info for ShearClass

Re. IPO price, the important thing to note with DARK is that it was priced very competitively compared to many 2020/21 IPO's, hence why it's traded above that level until today (BTW you have to laugh at the 'slumps below IPO price' headlines, as it traded below it for all of 10 minutes...)

This is a good article; https://www.bloomberg.com/news/articles/2021-04-30/darktrace-s-230-million-u-k-ipo-prices-in-middle-of-range

"Darktrace Plc soared on its first day of trading after the cybersecurity firm made the surprise decision to rush forward its IPO and cut its valuation by about half.

The shares jumped 32% to 330 pence in their first day of trading on Friday. The company raised 165.1 million pounds ($230 million), giving it a market value of about 1.7 billion pounds."

The fact revenue has since doubled and the company is now comfortably cash flow positive suggests the current price is like being able to buy the IPO at 125p...

At £2 the market cap would be just £1.4b with over £400m net cash on the balance sheet, it may happen but I'd be surprised.

Yep, it's not hard to get to a higher valuation than the current level. I think this is yet another example of why London is an absolutely dreadful market to list a tech company, UK funds won't be interested because on paper the P/E ratio looks outrageous and they won't even contemplate excluding share based payments from their calcs because they'll claim they are 'bad'. In reality, if they didn't offer a remuneration scheme that is comparable to US peers they would never be able to attract & retain a high enough calibre of employee.

Based on FY22 operating cashflow of $118m, EPS would have been ~13.5p, which at 250p puts it on a PE of 18.5. This makes very little sense for a high margin business growing top line & gross profit by 30%+. I suspect PE funds will be licking their lips.

At sub IPO price this looks interesting, I certainly can't see a short thesis below this level given the 90% gross margins + $440m cash hoard that is growing by >$50m per annum. My guess is this gets taken out during 2023, or cross lists to NASDAQ to access US liquidity and re-rate in line with peers like Zscaler. Zscaler has fallen by 67% since the start of 2022 but still trades at 10x revenues, on the same valuation DARK would trade at £6.40.

944k sell order on the book at 40.4p, someone wants out here ASAP.

It's a very ugly look to see the largest shareholder effectively take money off PI's at prices way above those they should have received in an orderly market. Pleased to see the share price has responded accordingly - this deserves to fall off a cliff considering the contempt the management have shown.

Can't be much downside from these levels if someone is happy to take 24m shares off directors for 8.3p a pop... 9.2p for a break of the 2 year downtrend, 10p for the 200DMA...

@Niggwitt,

You can 100% blame the company for issuing a vacuous statement on Friday which caused the share price to spike to 72p and then pouring cold water on the flames they created the very next trading day.

By the looks of things, there was information in the market on Friday that allowed certain parties to sell large amounts of shares at a price well above what should have been possible (based on yesterday's RNS). That is simply not on. Being able to sell 3m shares in one chunk at ~59p for example, has netted that seller nearly £600k more than they would have otherwise received, money that has essentially been taken from the pockets of PI's.

The share should have been suspended temporarily pending an announcement, then when that RNS arrived it could have resumed trading at the right price. It doesn't matter about future business or how long you've held the share, it's about right vs wrong.

NGR1616, I suspect you are overthinking the 'based on earnings' part, after all this would have been a royalty stream that would have flowed straight to the bottom line from Dow...

There is also the following;

"The gross settlement value should be expected to be towards the lower end of the range of expectations for a successful jury trial outcome as previously guided by the Company."

Whilst I do think anything over $200m gross is now out of the question, I don't think the net to Nano will be as low as £50m. Whichever, the shares should be suspended pending clarification of the exact commercial details.

@Geordie001, I agree it's hard to conclude anything other than that Friday's RNS was released so that LOAM & other large holders could offload at the expense of retail investors who would assume a large settlement was inbound and that anything under 60p was a safe bet...

Having let the news sink in, I think the below paragraph sets the stall out for a low ball settlement offer.

"The Board, having taken extensive advice from its advisers in the case, has concluded that the draft settlement offer provides a reasonable and immediate fair value for the litigation. The draft settlement accounts for both the potential downside risks of a jury trial, followed by what would likely be very protracted appeal processes, as well as the considerable adverse impact of further litigation costs and funding, and on the time value of money in a rising interest rate environment. Whilst there is still a degree of uncertainty around the final settlement agreement, we are working with Samsung to finalise the detailed agreement within the allowed 30 day period and look forward to updating shareholders further in due course."

Why would a settlement account for both a trial loss & a 'very' protracted appeals process when the two are more or less mutually exclusive?

If the settlement is indeed 'fair' then why aren't the upside elements included in Richards discussion justifying the offer? I.e. wilfulness multiplier, increasing number of units sold adding to any jury verdict etc etc.

I suspect it's between $150-200m & when you account for the litigation costs & corporation tax, will net the company around £100m.

Whichever way you cut it, the way this news has been handled is a disgrace & brings the LSE into disrepute. ASX shares are suspended pending material news & there is no chance NASDAQ / NYSE would allow disorderly trading like Friday / today to occur.

GigaWitt/ Nigwitt / whoever you are, you don't have talk some carp... as per my post NANO have absolutely provided expectations to the market - $200-250m was considered by them to be 'low end' for the US only. Listen to the Jan 2022 interview...

Yep I posted it earlier Morbox;

https://www.investormeetcompany.com/investor/meeting/interim-results-for-the-period-ended-31-january-2022

"Q10: Do the lower damages awards as reported by Edison ($200-250m) apply to the current litigation territory (US only) or to worldwide sales dependent on additional litigation?"

The answer was yes to US only and historic only. 'So if you're using that as a baseline number ($200-250m) then you have to apply those multipliers for the future & the rest of the world'

Could well be another one out there...

Ah here we go;

https://www.investormeetcompany.com/investor/meeting/interim-results-for-the-period-ended-31-january-2022

"Q10: Do the lower damages awards as reported by Edison ($200-250m) apply to the current litigation territory (US only) or to worldwide sales dependent on additional litigation?"

The answer was yes to US only and historic only. 'So if you're using that as a baseline number ($200-250m) then you have to apply those multipliers for the future & the rest of the world'

IMO, the ongoing negotiations will be to thrash out exactly how the multipliers work for 'patent peace' on a global basis... given that US sales only represented 33% of global unit volume, I can't see how this doesn't result in a total payment that is higher than the current market cap...

So ambiguous! No clear guidance has been provided for what shareholders should expect in the event of a global settlement because prior to Friday the trial was only focused on the US… we know $500m was mooted by the press but again that’s only for the US.

Bottom line is that the current market cap is $216m and the company has no debt, so it’s not like the market was pricing in a $500m+ win, it was pricing in a lengthy appeals process…

Saw mention of Nanosys earlier so I've been doing some digging on them as I wasn't up to speed at all.

Found this article from September / October 2022 information display, which waxes lyrical about their CEO; https://sid.onlinelibrary.wiley.com/doi/epdf/10.1002/msid.1336

"Samsung is one of Nanosys’ biggest strategic investors and R&D partner. At CES 2015, Samsung unveiled three QD-enhanced backlit LCD TVs devel-oped in partnership with Nanosys. The QDs were made of cadmium-free materials, marking the first time heavy-metal-free QDs were used in any commercialized product."

Hmm.

And then another interesting snippet from the P58 of the 2015 propectus filed when Nano moved to the main market;
https://wp-nanoco-2020.s3.eu-west-2.amazonaws.com/media/2019/08/Nanoco-Group-plc-Prospectus.pdf

"Also, it is known that Samsung have developed their own in-house cadmium-free quantum dot capability and, whilst it is not known whether or not Samsung have the ability to produce cadmium-free quantum dots in-house on a commercial scale, the Directors believe they will pursue a dual sourcing strategy"

Really interesting indeed that the apparent in house development appears to have been in combination with Nanosys, could the next step be action against them?

Really useful information in that docket... have such figures been disclosed before? I'm assuming not or they would been brought up by other members...

Great discussion here as always. @JBongo, regarding the forward multiple on any royalties, there is a crucial point that I had overlooked which was pointed out by @Intrusivethought, Nanoco's scientists haven't been standing still since the 5 patents which were chosen for the Samsung trial were filed. There are another 3 patents granted in recent years that provide coverage out to the late 2030's;

US9,234,130 - Filed Aug 7th 2013 - "Preparation of Nanoparticle Materials"
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/9234130

US10,227,529 - Filed Jul 22nd 2016 - "Preparation of Nanoparticle Materials"
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/10227529

US11,339,327 - Filed Dec 6th 2018 - "Preparation of Nanoparticle Materials"
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/11339327

Each patent further extends the earlier claims and I suspect their extremely proactive IP strategy + genuinely brilliant science is what has got them to yesterday's transformational milestone. If they had been lax on patents then they would have had no chance against Samsung...

Bear in mind that they also have several dozen patents pending (as per the presentation slide 11 shown in April's interim results presentation, presumably these further update the 'seeding' process which seems so critical to producing at scale.

Based on this I don't see why royalties won't continue for the foreseeable future and in that case the market will have to apply a PE of >10 given the value of future cashflow that will effectively be 'locked in'. Of course the actual royalties received will vary based on unit sales, however you have to think they will rise in the near term given Samsung's recent expansion into QD-OLED monitor production for global OEM's + stranglehold on the premium TV market.

Cheers Morbox, do you have a link for the Edison video in question?

IMO there isn't a chance that anything is priced in for a 5-10 year license agreement for premium products which sold ~10m units last year & which have recently become even more of a strategic focus for Samsung.

The precise value of the settlement for royalties on historic sales is what most newbies seem focused on, however I think the terms of any future licensing agreement are what will really shift the share price & market cap as well as help transform NANO into a mid cap rather than a 'minnow'. At the heart of this is the patent lifetime.

To anyone's knowledge, has Brian Tenner ever discussed the patent lifetime on any webcast or results call?

Here are the 5 US patents referenced in the 17th Feb 2020 RNS which kicked off the litigation;

US7,588,828; filed September 10th 2007 - 'Preparation of nanoparticle materials'
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/7588828

US7,803,423; filed April 27th 2005; 'Preparation of nanoparticle materials'
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/7803423

US7,867,557; filed August 14th 2006; 'Nanoparticles'
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/7867557

US8,524,365 filed October 6th 2011; 'preparation of nanoparticle materials'
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/8524365

US9,680,068; filed August 14th 2014; 'Quantum dot films utilizing multi-phase resins'
https://image-ppubs.uspto.gov/dirsearch-public/print/downloadPdf/9680068

In my amateur view, US8,524,365 seems to be the most important to shareholder value, as it relates to 'seeding' of QD's and is a continuation of much earlier filed patents US7,803,423 & US7,867,557. Based on the filing date + the 20 year life of a patent, it should be valid out to October 2031.

Having listened to the fantastic Q&A session on 21/10/22 on investor meet company, BT says the following at the 48 minute mark;

"We've grown in confidence that anyone making cfqd's is likely to be infringing our patents, and when I say anyone, I mean anyone, because we don’t think there is an easy way or a way to make them at mass scale that doesn’t infringe some of our core seeding / patents"

Based on those comments and the 47/47 PTAB wins, I have fairly high conviction that any licensing agreement could/should run to October 2031, providing nearly 9 years of future royalty income from today...

However, we also have patent US9,680,068 to add into the equation which is valid out to August 2034, so there is potentially another 3 years to add onto any agreement in a best case scenario.

Based on the above, I’d be surprised if BT has settled for anything sooner than 2031 as the end point in any licensing agreement & based on further hints around 0.75% royalties for 55” TV’s vs 1.1% for 65” in the same Q&A session, I’d be surprised if it didn’t include a minimum royalty of $10 per unit sold (inc. monitors, not just TV’s)

Interested to hear the thoughts of others who are far more knowledgeable that me, having only followed the company closely since the PTAB win last May...

Totally agree BeContrarian. I’m watching the full year results presentation & slide 12 highlights the litigation process at that point in time. Assuming a successful verdict you were looking at Q4 2023 before appeals were submitted and then potentially 3-4 years before the process could conclude. It could have been 2028 before NANO got their award. That information was in the share price whilst it moved between 35-55p during H222. Today that risk has been removed and the share price closes at 55p… it’s nuts.

Why has this happened? IMO you’ve had PI’s buying vs a major seller in LOAM + some PI profit taking.

No institutional money will have been free & waiting for this moment + it came completely out of the blue on a Friday. So you’ve ended up with supply of shares far in excess of what PI’s can soak up, and this has caused the share price to fall over 20% from the open.

I’ll be very surprised if it’s not over 70p by this time next week.

I'm becoming more and more convinced that the government give the right wing UK media a directive to deliberately try to mislead private investors via 'market news' and 'tips' and general reporting. They simply don't want too many average joes to be successful on the markets, otherwise they might get ideas above their station.

Why else would the Times state that the payout was going to be 'much less' than previously SPECULATED by the city? They then have the nerve to try and suggest that the market reaction is a surprise, is it sheer green eyed jealousy that a small cap can beat Samsung and make some money for it's shareholders? Looks like it to me.