The latest Investing Matters Podcast episode featuring Jeremy Skillington, CEO of Poolbeg Pharma has just been released. Listen here.
Today's RNS is great news by a great company.
For those unaware, the latest ‘Significant Shareholders’ data has been published on the company’s website. The data was updated on 19 April 2024 – the date our Interim CEO and CFO unleashed their wallets.
The updated data reveals the ‘forced’ (statutory liquidation requirement) departure of Joh. Berenberg, Gossler & Co. (4.66%) and Herald Investment Management (4.16%). They join Perpetual (3.95%) and CRUX Asset Management (4.51%) who exited shortly after the delisting announcement on the 28 March 2024.
Otus Capital Management (4.75%) and Lansdowne Partners International (4.51%), on the other hand, emerge as the only remaining institutional investors in the company, albeit with reduced stakes.
https://ir.sondrel.com/investors/shareholder-information
This means that, including the sold-off stakes of the existing institutional investors, a significant stock overhang of some 20,369,846 shares (23.29% of the issued share capital) was worked through between 11 April 2024 and 18 April 2024; a period that saw 22m shares change hands and a share price under sustained pressure.
And the resulting uptrend in the company’s share price, from the 22 April onwards, confirms the removal of the stock overhang.
Of course, most of that stock appears to have been mopped-up by private investors (‘Longs’); none of whom hold notifiable stakes in the company. This, in turn, means that, an estimated 38% of the company’s stock is now held by ‘Longs’, whilst the BOD and the two institutional investors hold 57.76% resulting in a narrow free float of some 3.5m shares (4% of the issued share capital).
It goes without saying, a free float of that size means that, any sustained buying pressure is now likely to put a rocket under the shares.
In the meantime, and following last Friday’s takeover of Darktrace by the Chicago-based, private equity firm Thoma Bravo, the UK has now become the ultimate fishing pond for US companies and investors looking for outstanding, GROSSLY UNDERVALUED, British tech companies:
https://rb.gy/3e3al1
https://rb.gy/4ohhlf
https://rb.gy/w7y4w7
https://rb.gy/uq4qi2
AIMHO
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“Nasdaq, America’s biggest stock exchange, is sniffing around London’s junior Alternative Investment Market.”
“The reason is the extraordinarily low valuations being put on UK companies – big and small – and one of the factors driving the recent flood of takeovers either by US companies or private equity.”
“Nick Train, one of the UK’s leading fund managers and stock pickers, went further earlier this week, describing valuations of British companies as ‘egregiously low’ and that one way to wake up investors would be if a takeover were launched for a giant UK blue chip.”
https://www.thisismoney.co.uk/money/comment/article-13341575/Dont-let-Nasdaq-aim-AIM-market-says-MAGGIE-PAGANO.html
And today, 25th April 2024, London got that wake-up call:
“The Board of Anglo American notes the recent press speculation and confirms that it is has received an unsolicited, non-binding and highly conditional combination proposal from BHP Group Limited.”
https://www.londonstockexchange.com/news-article/AAL/statement-re-possible-offer-for-anglo-american/16439392
“BHP PLOTS POSSIBLE TAKEOVER OF RIVAL MINING GIANT ANGLO AMERICAN. The acquisition of De Beers owner would serve a fresh blow to the Square Mile.”
https://www.telegraph.co.uk/business/2024/04/25/bhp-plots-takeover-of-rival-mining-giant-anglo-american/
Meanwhile, Sondrel, one of the UK’s fastest growing chip makers, with a current production pipeline sitting at £165m, and with the company’s BOD currently in advanced negotiations for significant new business, continues to be egregiously undervalued at £3.5m (4.20p per share).
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I mentioned in my previous post (of 17th April) that the head honchos of C4X Discovery, Molecular Energies, and Redx Pharma (Clive Dix, Peter Levine, and Lisa Anson) had all swooped-in and picked-up their company’s stock at ‘fire-sale’ prices only weeks after their delisting announcements, and after unsuspecting private investors lost their shirts through panicked sells.
Well, and as if on cue, Sondrel has just ticked that box with the CEO and CFO’s bargain share purchase at 3.50-3.60p per share only 3 weeks after their ‘delisting’ announcement!
And why isn’t this a surprise? The company’s stock, as previously stated, is incredibly undervalued across all industry benchmarks, and probably the most undervalued chip maker in Europe.
But more importantly, private investors have been given the clearest indicator of the material mispricing on display through the cornerstone investor’s funding commitment at 10p per share – WHICH SET A NEW FLOOR FOR THE SHARE PRICE.
And let’s not forget House Broker Cavendish’s Target Price for the company’s shares of 20p per share based on Sondrel’s UK peer group valuation.
In the meantime, private investors should be aware of ROX’s unspoken modus operandi:
• SILVERBRIDGE DELISTING ON THE CARDS AFTER UK FIRM POUNCES (April 2022)
The deal must be concluded by 31 August 2022 – including receiving the necessary regulatory approvals. Also, SilverBridge must have applied to the JSE by this date for the termination of the company’s listing on the bourse’s main board.
• SILVERBRIDGE TO REMAIN LISTED AFTER ALL (June 2022)
Technology services company SilverBridge will remain listed on the JSE after all, after its acquirer, UK-based ROX Equity Partners, agreed to waive the delisting requirement in its offer. ROX has waived several other conditions, greasing the wheels to the conclusion of the buyout – pending mandatory regulatory approvals.
“Everyone has a will to win, but very few have the will to prepare to win.” (Vince Lombardi)
Make sure you are part of the few. This stock (share price) will look very different in a very short space of time.
AIMHO
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“The company has entered into an exclusivity agreement with ROX on 5 March 2024 granting ROX the right to participate, ALONGSIDE EXISTING SHAREHOLDERS, in the Fundraise.”
“Under the terms of the agreement, ROX has confirmed, depending on the level of existing shareholders' participation in the Fundraise, ITS WILLINGNESS TO SUBSCRIBE FOR ALL THE NEW SHARES IN THE FUNDRAISE.”
Or put simply, assuming zero participation from the current cohort of institutional investors, ROX Equity Partners are ready to subscribe for all the new shares in the fundraise.
Longfell, your rationale assumes zero participation from the current cohort of institutional investors in the forthcoming share subscription. This is highly unlikely as they would want to protect their positions.
My speculative prediction is that, ROX end-up with 25%, Curren with 30%, and the existing cohort of II increase their holdings accordingly.
Either way, there’s nothing to stop a hostile approach from an opportunistic player.
AIMHO.
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Jamrock, further to my post, here are some of the company’s current fundamentals:
• City heavyweight David Mitchard has been appointed CEO of the company. Mr Mitchard, currently a Director at BAE Systems Integrated System Technologies Ltd, comes with a deep understanding of complex technological environments like Sondrel’s, and an impressive track record of business-building, stakeholder engagement, and hard-nosed leadership.
• The company’s ultra-complex chips offer significant scale improvement when it comes to latency, privacy, security, and increased efficiency; making it one of only a tiny handful of companies out there that are able to do this.
• The company notched-up a Compound Annual Growth Rate of circa 20% per year for 22 years with no external funding!
• The company’s medium-term target of annual revenues of £100m remains intact.
• Current production pipeline sits at £165m of prototype and design opportunities, of which £90m is booked in the US with 18 potential customers.
• The company has landed a significant order worth £18m to design and supply a next-generation video processing chip for high-performance video streaming solutions.
• The company has landed a further four new orders with two existing customers and two new customers. These contracts will generate a combined revenue of £0.75m in the current financial year.
• The company is currently in advanced negotiations for significant new business. European and US market demand for the company’s services remains strong.
• The worldwide semiconductor market forecast to reach $1 trillion by 2030. ASIC market alone is expected to make up 40% of that market.
• The company’s focus is on AI, Automotive, and High-Performance Computing.
• The company’s unrivalled expertise has allowed it to sign-up some of the most admired blue-chip brands in the world as it customers – Apple, Google, Sony, Samsung, Tesla, ARM, Siemens, etc.
• The company has a strong institutional investor backing in Otus Capital Management (7.28%), Joh. Berenberg, Gossier (4.66%), Herald Investment Management (4.16%), and Lansdowne Partners (4%), whilst an estimated 17% of the stock is currently held by private investors.
• House Broker Cavendish has a Target Price for the company’s shares of 20p per share based on Sondrel’s UK peer group’s EV/Sales of 2.2x.
• Financing is currently secured with private equity firm Rox Equity Partners at 10p per share – a 180% premium to yesterday’s closing price of 3.60p per share.
AIMHO
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Jamrock, if your investment strategy is predicated on the signals emanating from Britishbulls.com then I strongly suggest you have a re-think on your investment here, or any other value stock that requires patience and conviction in the fundamentals. Unless, of course, you’re a Day Trader? In which case, and as you probably know, time is never on your side. And no matter how much time you spend trying to decipher intricate patterns and strategies, the odds of being correct are notably slim.
Recent research by the FT's market team revealed that even the most skilled professional Day Traders were correct only 47% of the time, while average traders fared even worse at 6.5%.
By the way, and just in case you were unaware, the aforementioned site is commonly referred to as ‘British bull***t across most brokerage houses for its staggering inaccuracy. And Zak Mir’s daily ‘pearls of wisdom’ is not far behind that.
As for me, I have, and always will be, a Value Investor. And for a good part of my 25 years in the game, and working for a few start-up brokerage houses in that time, I have largely done well on this strategy.
Remember, risk comes from not knowing what you’re doing.
And in the realm of AIM investing, conviction can be a double-edged sword. Leverage it properly, and it becomes your strongest ally, leading you to investments that can alter your financial course. Misuse it, and you can find yourself drowning in a sea of losses.
Thus, the Value Investor's biggest adversary isn't the unpredictable market, but rather their own reflection. The fear, greed, doubt, and impatience it mirrors can be more detrimental than any bearish market trend. That's why mastering the ability to hold firm to high-conviction investments is crucial.
Howard Stanley Marks, the serial value investor, provides an essential nugget of wisdom here; In an era where social media often spreads baseless rumours or inaccurate assessments of stocks, it's easy to be swayed by public opinion. However, a true conviction investment is one where you have an unshakeable belief in your position, even when the consensus is against you.
Jamrock, do you have an unshakeable belief in the fundamentals (of Sondrel)? EVEN WHEN THE SHARE PRICE IS NOT BLUE? If you do, then the noise emanating from Britishbulls, ZM, or any other Day Trading platform, is utterly immaterial. Which means, you don’t need to keep tracking the share price every hour. Just be patient. The fundamentals will eventually come through. However, remember, NOTHING EVER GOES UP IN A STRAIGHT LINE.
AIMHO.
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Take C4X Discovery, Molecular Energies, and Redx Pharma for example; a week after their delisting announcements, the head honchos (Clive Dix, Peter Levine, and Lisa Anson) swooped-in and picked-up stock at ‘fire-sale’ prices, and after unsuspecting private investors lost their shirts through panicked sells. Utterly reprehensible! But that is capitalism for you. And the stocks are now trading significantly higher than their ‘delisting’ trade prices, despite inching closer to delisting. This means that, investors are now prepared to hold privately marking a significant step change in the investment culture.
So private investors are not going to fall for the copper-plated nonsense being spouted by some of these greedy actors who want to steal the business under their noses.
And Sondrel, which is incredibly undervalued across all industry benchmarks, and probably the most undervalued chip maker in Europe, is going to trump all these companies and change the narrative. Watch this space.
And yes, I agree – this is what makes the current situation with SND so interesting.
AIMHO.
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Sorcerer, your description of Sondrel as a business with “market leading capabilities, contracted future revenues of $200m, and a strong sales pipeline in a pivotal growth industry”, is bang on the money.
The company’s ultra-complex chips offer significant scale improvement when it comes to latency, privacy, security, and increased efficiency; making it one of only a tiny handful of companies out there that are able to do this, and which explains why Elon Musk’s brain implant start-up, Neuralink™, called on the company for its expertise in designing its brain chip.
https://www.thisismoney.co.uk/money/markets/article-13062751/Tech-minnow-Sondrel-doubles-value-reports-played-key-Elon-Musks-Neuralink-brain-chip.html
https://markets.businessinsider.com/news/stocks/elon-musk-neuralink-value-tech-chip-stock-trades-ai-brain-2023-6
Now, let’s just think about that for a moment. Why has a $5 billion-capped US biotech sought assistance from an off-the-radar British nano-cap? What kind of expertise does it have that is clearly out of the reach of the thousands of US chip makers accessible to Elon Musk? And what’s the inherent value of this expertise/business?
The answer to those questions is the reason why institutional investors Otus Capital Management (7.28%), Joh. Berenberg, Gossier (4.66%), Herald Investment Management (4.16%), and Lansdowne Partners (4%) are still here, and why an estimated 17% of the stock is currently held by private investors.
But a £3.3m market cap (3.85p per share) simply does not cut it!
Which is why I remain fully invested because, as you rightly put it, there are several possible outcomes here; some pretty spectacular, but none that is likely to value the business anywhere close to where it is today.
And a quick glance at the recent ‘delisting stocks’, and how they have performed since their delisting announcement, paints an interesting picture of a fast-evolving, private investor perception of these stocks. Put simply, nearly all the stocks have staged a strong recovery meaning that, private investors are prioritising value over exploitative ‘engineered fear’ by some greedy actors within those businesses.
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ROX understand that, it’s only a matter of time before one of the many circling predators makes a move on Sondrel – especially at the current lowly market cap (4p per share) which considerably underrepresents and undervalues the business. So open season it is. Or as our North American brethren aptly put it – Game On!
But word of caution; don’t take your eye off ROX, who are renowned for their ‘surgical’ strikes:
https://www.finextra.com/pressarticle/94965/silverbridge-acquired-by-uk-pe-firm-rox-equity-partners
https://itweb.africa/content/DZQ587V8oKJqzXy2
Thus, Sondrel is fast growing into a big pay day for the private equity firm.
Howard Stanley Marks, the serial value investor and founder of the multibillion, wealth management firm Oaktree Capital Management, once opined that:
"All intelligent investing is value investing; acquiring an asset for less than its value means seeing what everyone else sees and thinking what no one else thinks."
AIMHO.
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Avid chartists would’ve spotted the trend line on the Accumulation Distribution Indicator (ADI), for the Sondrel stock, moving steadily upwards. This bullish signal points towards investors actively accumulating stock.
During yesterday’s trading, the ADI rose, indicating that accumulation is taking place with a possibility of an upward break out. To this end, and experienced traders would know this only too well, it’s pure folly to sell in this phase as the MM’s will repeatedly drop the stock (triggering ‘stop losses’ to flush out day traders) to allow them to gather scarce shares, only to release the price back up to its optimal (reflective of supply and demand conditions) point.
That aside, and as indicated in my previous posts, the company’s shares are changing hands at a significant discount to both its Enterprise Value (£10.1m or 11.5p per share) and it’s ROX-underwritten share subscription price of 10p per share. And that’s before we talk about the order book – currently estimated to sit at circa £165m.
For the record, ROX’s key strapline is “Long-term investors in disruptive technologies.” This accurately describes their modus operandi and also helps shareholders understand why they’ve taken a material interest in Sondrel – a company that is targeting a £230bn market, and one that is growing at circa 20% per year.
And only today, TSMC, one of Sondrel’s key strategic partners, advised the market that, first-quarter profits were expected to rise 5% on strong AI chip demand. This is after it received a $11.6 billion grant (a combination of direct funding and loans) to establish an advanced chip manufacturing facility in Phoenix, Arizona.
https://www.reuters.com/technology/tsmc-first-quarter-profit-expected-rise-5-strong-ai-chip-demand-2024-04-16/
https://www.bobsguide.com/tsmcs-receives-grant-to-leap-into-us-chip-manufacturing/
But I suspect the real attraction here, for ROX, is the company’s unrivalled expertise (130 IC Engineers and a staff retention rate of 95%) in the design and manufacture of ultra-complex chips that has allowed it to sign-up some of the most admired blue-chip brands in the world as it customers – Apple, Google, Sony, Samsung, Tesla, ARM, Siemens, Mercedes-Benz, etc. These companies turn to the Reading-based nano-cap because they want chips that are smaller and more powerful than off-the-shelf varieties, use less energy and stay cooler for longer. And demand is soaring, as technology becomes ever more sophisticated.
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With regards to the delisting proposal, I absolutely get it. AIM is not only expensive (£500,000 per year to maintain a listing), it’s completely broken and closed. And the lack of UK institutional investor interest in tech stocks makes delisting an even more compelling proposal given that Sondrel could quite easily IPO on the NASDAQ market at 20x its current market cap, and have access to a broader universe of investors and, accordingly, a larger quantum of future funding to execute their strategy.
And the flight of good quality, UK tech (inclusive of biotechs) stocks to the private sector (unlisted) and, eventually, to Wall Street, is equally astonishing. However, rumours surfacing last week in the City indicated urgent regulatory modifications being fast-tracked by the UK financial watchdog to stem the exodus and enhance the country’s appeal for business and investment. So it’s worth watching this space.
https://www.ccn.com/news/business/wall-stree-stock-exchange-undervaluation/
In the meantime, Sondrel shareholders have the luxury of time before a definite decision, and timeline, is provided for the delisting proposal which, for all intents and purposes, could be reviewed on a strengthening share price (closer to the TP). Who knows?
What I do know is that, having been invested in SND for the last 14 months, I strongly believe this is an incredible opportunity to buy into a remarkable business at bargain-basement prices.
Or put another way, the current market cap of £2.9m (3.5p per share) represents a glaring undervaluation in the market, and which is likely to be corrected at pace.
AIMHO.
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Now, by way of background, and like fellow AIM-quoted nano-caps ETX, REDX, C4XD, and MEN, the announcement to delist from AIM initiated a statutory liquidation action from Sondrel’s institutional investor Perpetual. This, alongside panicked private investors, sent the company’s shares crashing from 11.2p to 3p. However, once Perpetual had notified its exit, and once Lansdowne (another II) had announced their reduced position, value investors swooped-in on the 11 and 12 April 2024 sending the shares up from 3p to 3.5p. I believe this is just the start of the recovery as the shares are currently grossly mispriced.
And with the stock overhang (6,559,632 shares or 7.5%) now removed, the share price should stage a strong move to the upside as the market finds an appropriate value of the company. The share subscription at 10p per share sets a new floor for the share price and should serve as the first target ahead of a comprehensive rerate of the company’s shares.
House Broker Cavendish slapped a conservative Target Price for the company’s shares of 20p per share back in February 2024 based on Sondrel’s UK peer group’s EV/Sales of 2.2x. This target still stands.
Nevertheless, and even at 20p per share, Sondrel’s valuation is paltry when compared to her peers in North America. Last week, Hailo Technologies Ltd, an Israel-based artificial intelligence chipmaker, raised £96m in funding — the latest sign of US investor enthusiasm for bespoke businesses manufacturing advanced chips that can support the intense data processing needs required to develop AI tools.
Put simply, the world is going to need a lot more chips if artificial intelligence (AI) is going to become a ubiquitous technology. And Sondrel is set to play a big part in that transition with its higher-spec chips built on the most advanced semiconductor technologies. It recently unveiled its latest chip – a chip designed on a 5nm process node with more than 50 billion transistors!
https://industrialnews.co.uk/sondrel-poised-to-support-the-evolution-of-intelligent-cars-with-ultra-complex-chips/
The real kicker here, however, is that, the ultra-complex chip shortage is not going anywhere soon and, with data from SIA showing that a finished chip can take up to 26 weeks to manufacture, the investment case in Sondrel should remain strong for at least the next seven years.
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Jamrock et al, if the stock market was the perfect arbiter of value, then anomalies such as Sondrel just wouldn’t occur.
The reality is, the stock market is often wrong, and sometimes very wrong. The reasons can be many. But human psychology and poorly informed participants are often the causes.
This is not always a bad thing as it creates substantial opportunities for the shrewd investor.
So, what’s the story here?
Sondrel, a leading provider of ultra-complex chips for leading global technology brands, and whose tech is reputedly part of Elon Musk's Neuralink™ brain chip, recently advised the market of the following:
• It had secured some interim financing with private equity firm, and cornerstone investor, ROX Equity Partners for £2.9m whilst it finalises a fundraising for an additional £5.6m, also with ROX.
• The fundraise will be fully subscribed at 10p per share. That’s a staggering 185% premium to Friday’s closing price of 3.50p per share.
• The £2.9m interim loan will be convertible into ordinary shares, at the discretion of ROX, and at a conversion price of 10p per share – a 185% premium to Friday’s closing price of 3.50p per share.
• Post the fundraise, and to finance the company’s ‘Transformation Plan’, ROX has agreed to provide additional funding of up to £1.5 million which will be subscribed at 10p per share – a 185% premium to Friday’s closing price of 3.50p per share.
• The Transformation Plan features the appointment David Mitchard (ex-Director of Maritime Services at BAE Systems) as interim CEO; the appointment of Graham Curren as CEO of Sondrel Ventures (a newly-established subsidiary of the company which will focus on strategy and business development); the appointment of two non-executive directors; and the proposal to delist from AIM. The AIM cancellation (delisting) resolution will be put to shareholders within six months of completion of the fundraise.
• The company has landed a significant order worth an estimated £18m to design and supply a next-generation video processing chip for high-performance professional video streaming solutions by an unnamed customer.
• The company has observed a strong demand for its 3nm design services for custom ASICs. 3nm is needed for the next generation of products, particularly AI-based designs that require immense compute power to process the huge amounts of data being processed.
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Today’s RNS, once again, underpins my argument that Redx is spectacularly undervalued, and is being actively chased, at these ‘fire sale’ prices, by both institutional and shrewd private investors who recognise the material opportunity on show. And the window for taking advantage of a share price sub 15p (an absolute steal) is closing fast.
And in case you didn’t notice, the London market appears to be entering into a 'new normal’ with delisting companies’ valuation staging a strong recovery back to their pre-announcement levels as investors slowly begin to realise that, the UK markets are not just illiquid, they’re completely broken and closed, and that they are actually better off diversifying (listed and unlisted) their equity investments for maximum capital growth.
Or put another way, the lack of interest in UK equities, that has seen 34 months of net outflows and left the UK the cheapest major market in the world on a PE basis, is triggering a significant step change in the way private investors view unlisted equities. The latter simply offer a substantially better return on investment, where companies like Redx can access a broader universe of specialty investors and, accordingly, a larger quantum of future funding required to execute their strategy. So why should they jump the financial and regulatory hurdles of public market life when growth capital can be easily found elsewhere?
From my viewpoint, and having been invested in Redx for the last 18 months, I strongly believe this is an incredible opportunity to buy into a remarkable business at bargain-basement prices. Period.
The company has an impressive track record of executing sale/licensing deals with attractive economics, especially given the early, research/preclinical stage of development, has provided external validation of Redx’s medicinal chemistry expertise and drug design capabilities.
Importantly, these deals have facilitated continued pipeline progress and provided non-dilutive funding to support the wholly-owned priority ROCK portfolio.
Specifically, and following the February 2024 KRAS licensing deal, Redx now has four partnership agreements: three with Jazz and one with AstraZeneca.
And to date, upfront/milestone receipts total £51.5m, with potential future success-based milestones of circa £1.3bn in aggregate plus royalties on sales.
Two words: Spectacularly Undervalued
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Further to my previous posts, I’ve set out (below) a timeline of events in chronological order to help explain the events of the last four days. My subsequent conclusion, at the end, mirrors the views of many on this BB. So here goes:
1. On 02 April 2024 (the date of the delisting announcement), 1.8m shares changed hands and the share price closed down at 6.5p.
2. On 03 April 2024, 900,000 shares changed hands and the share price closed up at 7.5p.
3. On 04 April 2024, 1.1m shares changed hands and the share price remain unchanged at 7.5p.
4. On 06 April 2024, 9.65m shares changed hands and the share price closed down at 4.25p.
5. On 08 April 2024, 10.65m shares changed hands and the share price closed up at 6p.
CONCLUSION:
• Polar Capital sold 810,000 shares on 02 April 2024. This, alongside panicked private investors bailing after the disappointing but understandable announcement, sent the company’s shares crashing from 18.5p to 6.5p.
• Value investors swooped-in on 03 April 2024 sending the shares up from 6.5p to 7.5p.
• Polar Capital then placed their mammoth order to sell the remaining 20,301,504 shares on Friday morning (06 April 2024). This triggered a 45% drop in the share price as buyers were found at between 4.25p-4.5p. The order was, nevertheless, completed on Monday morning (08 April 2024) thereby allowing the share price to commence its recovery.
• With the stock overhang now removed, the share price should stage a strong move to the upside as the market finds an appropriate pre-delisting value of the company.
• It’s also quite possible that we may see further TR-1 notifications revealing the identities of the institutional/private investors who may have snapped-up some of Polar Capital’s shares.
• Either way, and at the current share price of 6p (£23m market cap), the Redx stock is grossly undervalued.
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Rayte, the BOD advised the market on the 02nd April 2024 RNS that it had received letters of intent and irrevocable undertakings from ‘certain shareholders’ representing approximately 84.64% of the company's issued share capital to vote in favour of the delisting resolutions.
The ‘certain shareholders’ are:
1. Redmile Group – 71.18% (276,890,319 shares)
2. Sofinnova Crossover – 13.46% (51,958,907 shares)
This leaves Polar Capital (5.43% or 21,111,504 shares) and Invus (3.91% or 15,203,815 shares) as the only large holders who’ve not declared their hand, and the likely suspects responsible for Friday’s share price drop – 9m shares were sold at an average of 4.30p.
However, going by recent TR-1 notifications, Polar Capital appears to be the likely seller.
https://www.londonstockexchange.com/news-article/REDX/tr-1-notification-of-major-holdings/16324789
This is good news as the share price is likely to recover sharply next week with the sell order now completed.
However, and as indicated in my previous post, the AIM market has singularly failed to value Redx appropriately.
And landing its largest ever commercial deal, WORTH £690m, should have – ON IT’S OWN – moved it into the 60p – 80p trading range. But it didn’t. Instead, it nudged it up by a paltry 5p to finish at 25 pence per share. This was a mighty red flag for the company on how dysfunctional the AIM market is, and also the trigger for the delisting action WHICH I ABSOLUTELY WELCOME.
And it doesn’t take a Rocket Scientist to figure out the likely trajectory of the company’s share price over the next six months:
• The £8m ($10m) upfront payment from Jazz, which extends the cash runway into 2025, expected shortly.
• Significant data for Phase II Zelasudil for IPF expected within the next 9 weeks.
• RXC004 data expected within the next 9 weeks.
• IND clearance from the FDA, for the company’s KRAS inhibitor program, is expected within the next 11 weeks. This will trigger a substantial payment.
• The company’s conservative NPV currently sits at £385m (98 pence per share) – that is ahead of any of the aforementioned value inflection points.
• Redx is unlikely to remain private in the medium to long term. A NASDAQ listing, or an opportunistic takeover from big pharma is the most likely outcome over the next 12 months; after a significant revaluation of the company's shares.
AIMHO.
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Moniman, Compoundinterest, typically, banks do not support a matched bargain facility.
The main players in this field are AJ Bell, Interactive Investor (Abrdn PLC – formerly Standard Life Aberdeen PLC), and ShareDeal Active (Jarvis Investment Management Ltd).
https://www.ajbell.co.uk/our-services
https://www.sharedealactive.co.uk/
https://www.ii.co.uk/
The set-up process (from opening a trading account to transferring the private security) is pretty straightforward and takes less than 14 days.
The real kicker here, however, that PIs must not overlook, is the significant investment opportunity on show. The AIM market has singularly failed to value Redx appropriately. And like broker TD, I absolutely agree that the company’s shares should be changing hands at prices north of 80 pence per share. And the Jazz deal alone should have moved it into the 60p – 80p trading range.
Of course, human psychology and poorly informed participants are usually the main contributors of stock mispricing, which, invariably, create incredible investment opportunities for the patient investor.
And right now, at 7.50p, Redx is a screaming BUY:
• Led by the former president of AstraZeneca UK, the company has just landed its largest ever commercial deal worth £690m with the £6bn-capped, NASDAQ-listed, Jazz Pharmaceuticals.
• The £8m ($10m) upfront payment from Jazz, which extends the cash runway into 2025, is expected shortly.
• Significant data for Phase II Zelasudil for IPF is expected within the next 10 weeks.
• RXC004 data is expected within the next 10 weeks.
• IND clearance from the FDA, for the company’s KRAS inhibitor program, is expected within the next 12 weeks. This will trigger a substantial payment.
• The company’s conservative NPV currently sits at £385m (98 pence per share) – that is ahead of any of the aforementioned value inflection points.
• Redx is unlikely to remain private in the medium to long term. A NASDAQ listing, or an opportunistic takeover from big pharma is the most likely outcome over the next 12 months; after a significant revaluation of the company's shares.
AIMHO.
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Longfell, JP Jenkins is an excellent trading platform for private companies. I currently hold and trade (via ShareDeal Active) without issue, AMT Global Investments LTD (AMT) and Tende Energy (formerly Sirius Petroleum). I expect Redx's trading price to re-rate markedly once private.
https://jpjenkins.com/
AIMHO.
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“The plan to delist from AIM is disappointing but, in our view, understandable. The shares have failed to reflect the value inherent in the business and, importantly, the future potential. As we have stated in previous notes, Redx has a solid track record of delivery, with six molecules in the clinic and four major partnering deals over the past five years.”
“Data for lead ROCK asset Zelasudil for IPF (idiopathic pulmonary fibrosis), which are a key catalyst for Redx, continue to be expected during H124. Redx also continues to execute on business development opportunities within its pipeline, with a third deal signed with Jazz; further deal(s) could be catalysed once RXC004 data become available in H124.”
“Thus, we have increased our NPV target to £386m (99.00 pence per share) which comprises of the company’s current cash balance, incorporation of the game-changing and highly significant Jazz KRAS deal, and slightly de-risking RXC008 result in an increased valuation. The £8m ($10m) upfront from Jazz extends the cash runway into 2025, well beyond key H124 value inflection points (Phase II Zelasudil and RXC004 data).”
SM1 VIEW
Thus, despite its huge potential, Redx’s market cap stands at a mere £24 million, representing a glaring undervaluation of gargantuan proportions; and one that is unlikely to be missed by the £5.8bn-capped Jazz Pharmaceuticals (NASDAQ: Jazz).
AIMHO.
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