Member Info for ShearClass

The ITM valuation does look like a bargain at present compared to industry peer NEL.

NEL are capitalised at NOK 18.9b / £1.57b, had cash at the end of Q1 of £315m so have a current EV of £1.25b
ITM is capitalised at £1.04b market cap with cash of £364m, so an EV of £678m

Yes, NEL have higher revenues at present but both valuations are clearly about the next decade - the below extract from the recharge news article suggest ITM should be valued above NEL, not the other way around;

"The company plans to ramp up its 500MW factory in Herøya, Norway to 2GW once firm orders start flowing. And ITM, which is putting additional automation in its Sheffield factory, plans to be at 2.5GW capacity by 2023 and 5GW by 2024."

Certainly a difference of £572m in Enterprise Values doesn't make sense and I don't expect it to remain that way for long...

Death spiral funding via what is essentially a short term convertible loan, still only provides a 6 month cash runway. Not good.

Yeah saw that one too, less clear on the commercial potential but it'll certainly attract attention. Worth reading the comments on the VictoryXR post if you haven't already, particularly like Steve's comment about it being like the original model S Tesla. I can't see it being anything other than a huge success, there's so much enthusiasm for something new.

An exciting post by Victory XR yesteday; https://www.linkedin.com/posts/steve-grubbs-4708825_it-seems-almost-impossible-like-something-activity-6947597033046167553-e8Vc?utm_source=linkedin_share&utm_medium=member_desktop_web

"It seems almost impossible, like something out of a scifi movie, but it's true. Students will be attending class - with their professor and other classmates - on this campus this fall. Because of the vision of South Dakota State University, remote learning on a digital twin metaversity campus is happening.
Here's what 'learning on a metaversity campus' really means:
1. Students will be together synchronously with their class, just like the real world.
2. They will not have to travel to get to class, just pop on a headset or turn on a computer.
3. They will break into small groups, work on project and then come back together to report out.
4. They will watch videos, slide decks, write with a 3D pen in mid-air unlike a real brick-and-mortar classroom.
5. They will be able to revisit the class recorded in full 3D if they miss class or simply want to review what the professor said.

This digital twin campus, built by VictoryXR on the amazing Engage VR platform is working with universities to change the status quo for the better."

This had a similar spike down at the start of May, based on the downtrend that was established that day I've got a target of 38p - level 2 looks very weak & it's been possible to buy at bid most of the morning, suggesting there is further to fall.

@daveboy19, they could / will go the same way because they won't be able to raise enough cash to execute any kind of realistic business plan. Maybe more like Sensyne than DDDD, but the same end result nonetheless.

FDA approval without revenue generation in the subsequent 3 years is absolutely pointless, SG&A costs were £6.1m in the 6 months to 30/06/21 and that was before a US launch which delivered revenues of £100k in the first 6 months... Don't forget they spent 2 years looking for a launch partner before giving up and going it alone.

I'd put the odds of success here at <5% now, it's possible but requires seismic change which there is zero evidence of right now. The fact they've left their accounts to the last minute isn't exactly a great sign either is it?

The payment on it's own is worth 7.5p...

Suspect this may do 100% today, 25p would be a logical target price and there should be a decent bit of PI money floating around after the after the 150% rise for INSP yesterday...

Where are the results?? I suspect this & DNL will end up going to the same way as DDDD, they are going to really struggle to raise cash in the current environment so are highly likely to resort to debt / death spiral funding. Their last placing to raise £25m was at the very top of the pharma bull market of 2020/21, they only had £12.1m left at 31/12 down from £22.6m at 30/06, based on that burn rate they will now have in the region of £2-4m cash. Avoid IMO.

I've been researching the Unity game engine which is at the heart of ENGAGE, inspired by 'winning in the metaverse : five lessons learned from gaming -https://www.kpmg.us/content/dam/global/pdfs/2022/five-lessons-learned-from-gaming.pdf

The main question I wanted to answer was what is stopping ENGAGE from gradually evolving over the next few years from where it currently stands to something approaching real life?

I came across this recent demo from Unity which suggests that creating incredibly realistic 'digital humans' is already possible... https://unity.com/demos/enemies

It's well worth watching the hour long talk by Mark Schoennagel halfway down the page which explains how they achieved the stunning effects.

I was also particularly interested in the technique called photogrammetry, the art of extracting 3d information from photos. You could imagine metaversity campus buildings being brought to life in incredible detail or any number of other use cases.

In the brief Q&A at the end Mark confirms that the hair simulation etc should work fine in VR games using Oculus quest 2 as they perform fine on low end graphics cards, suggesting it won't be too long before things take a major step forward inside ENGAGE.

Fast forward 3 years and I think we'll be amazed at the progress that will be made, the innovation leaders at KPMG clearly have an idea of the potential given their decision to go with EXR, however I don't think many private investors have a clue at present...

Yep it's another example of ENGAGE having an early head start with corporates, something that is so important in any new industry. If they can keep innovating & improving the graphics quality then there is no reason they can't take a chunk of market share as the industry evolves...

This is a good read; https://medium.com/@mingchikuo/new-growth-focus-of-vr-headset-industry-in-post-meta-era-metas-competitors-chinese-market-and-491c7537e20b

"(5) After Apple launches AR/MR headset, I think Apple’s global rivals will compete to imitate it, leading the headset hardware industry to the next stage of rapid growth and benefiting the related services and content ecosystem."

Great timing with the metaverse launch planned for this autumn :)

I note Amati launched a new ‘strategic innovation’ fund on 23rd May which could explain the strategy change in the incumbent smaller companies fund; https://www.amatiglobal.com/fund/tb-amati-strategic-innovation-fund/overview

“investing in companies that create value from innovative products, services and business models that address key challenges facing businesses, consumers and societies, where the impact of such innovation is not fully priced in by the market”

Kidney disease is certainly a key challenge facing society & now would be a logical time for a new fund to invest…

I wonder if they fully existed the position in the smaller companies fund by transferring the shares to the new fund? It would make a lot of sense (and potentially explain the lack of any TR1 to go below 3%?

Yep! The ‘winning in the metaverse’ part nails it…

“In fact, many people have already interacted with the metaverse by playing games like Fortnite and Roblox.These games operate virtual 3D worlds where millions of people worldwide gather to play, socialize, buy virtual items, attend special events and participate in a digital economy—all within the game. Although these two games are not decentralized, they offer a clear path toward Web3 metaverses.”

“While these lessons from gaming can help companies advance their metaverse strategy, it’s important to note that challenges still exist around governance and data and privacy issues. The future governance of a decentralized metaverse centers on decentralized autonomous organizations (DAO), where users act as shareholders with voting rights depending on ownership levels. Companies will need to determine rules and assess risk considerations when their brands enter these virtual spaces.There’s a real need for companies to truly understand the difference between centralized and decentralized models not only
from an infrastructure perspective, but also from
a governance perspective.”

Oh and I should have asked where the confirmation that Amati had exited in full came from @handybrownone?

I think they’ve made an error if they’ve disposed of the entire stake at current prices. There were significant block trades at the end of May priced at £1.47 - £1.55 which match up though.

They bought in the IPO at £1.20 so was the thinking to simply book a profit and move on? A 25% gain over 3.5 years looks good to the average Joe but their position was up over 1000% the peak last year & Jourdan said on YouTube that they were still very bullish!

I.e. https://www.piworld.co.uk/education-videos/piworld-interview-with-paul-jourdan-markets-macro-opportunities/

“What companies in the sector is Paul most excited about?
09:54 Polarean Imaging (POLX)
13:12 Renalytix (RENX)”

Share price at the time of that interview was £11…

Just been looking into the Amati exit as it really surprises me after such a large decline… however here’s their market commentary in their report to 31/01/2022;

“Beyond exiting companies with earnings risk, our disposal strategy in the period has been to reduce the portfolio’s exposure to devaluation risk from higher rated stocks battling the discounting caused by rising interest rates. Examples included MaxCyte and Softcat as detailed earlier; gene and cell therapy specialist, Oxford BioMedica; language, content and IP services provider, RWS; private equity incubator IP Group; animal genetics company Genus; scientific and industrial research product provider, Oxford Instruments; and veterinary pharmaceuticals specialist, Dechra. For most of these companies, their share prices have continued to underperform following our exit.”

https://www.amatiglobal.com/storage/872/TB-AMATI-INVESTMENT-FUNDS-ANNUAL-20220131-(002)-FINAL-WEBSITE.pdf

So it appears to be a strategic decision & indeed they held onto RENX far longer than most highly rated stocks, suggesting major reluctance to sell?

Excellent to get 100% confirmation. ENGAGE is closed source proprietary software which enables the web3 transition without being built on web3 (blockchain open source). The strategic positioning is genius & explains why we have been able to attract clients of the calibre of KPMG. A professional metaverse has to be closed source, secure and private, anything else simply won't cut the mustard.

It's one of the most deceptive RNS's I've ever read so I wouldn't worry about getting suckered in... I still don't know how they are allowed to agree a $60m loan on 31st March and not release an RNS straight away? It's clearly very material information.

@unhooked;

P1 - the loan;

"On 31 March 2022, we raised a $60 million credit facility with a syndicate of banks. Under the facility we may borrow against our US inventory. Borrowings bear interest between Secured Overnight Financing Rate (SOFR) +325bps and +375bps. On completion of the facility, the Group drew, and continues to draw, $21 million consistent with the facility cash deposit covenant."

P2 - the covenant;

"The ABL is subject to three covenants: a current ratio test, minimum cash held at a bank within the syndicate, and a minimum quarterly Repeat Customer Contribution profit test. The Repeat Customer Contribution profit covenant is with reference to an absolute level, rather than a ratio. Consequently, it is most sensitive to macroeconomic factors and, under a downside scenario, there is a risk that the Company could breach this covenant, with headroom versus the covenant most limited in Q1, Q2 and Q4 of FY23."

P3 - risk of breach due to below forecast trading

"Management has assessed covenant compliance over the next 12 months based on a detailed forecast model that projects an income statement, balance sheet, and cash flow statement based on key drivers of the business including, inter alia, assumptions on New Customers, customer retention/attrition by tenure, order frequency, average order value, gross margin and fulfilment costs per order. Sensitivity analysis was also performed on this base case forecast. Under the base case, the forecast model projects that all covenants will be met over the next 12 months. A downside scenario resulting in a 7.5% to 20% sensitivity against the base case forecast for Repeat Customer sales could result in a breach of this covenant. When taking into account actual trading results to date which are below forecast, a downside scenario of 3.7% against forecast would result in a breach of this covenant at June 2022 and as a result of the sensitivity in the downside scenario, management have identified a material uncertainty on meeting this covenant."

Why this wasn't disclosed in the outlook statement is completely beyond me. It's why it opened at £2.76 and not substantially lower. Absolutely shocking.

Simply incredible that they could agree a $60m loan on March 31st (and apparently not notify the market at the time, unless I'm blind) and then be on the brink of breaching it's terms less than 3 months later... almost unheard of.