Hi madamswer et al.,
Its great to see a lot of new posters on NEA...Welcome aboard.
I dont post that often, so apologies for the longwinded history....
It was now 9 years ago, I was at a fairly liquid lunch in Perth when I got a call from an analyst who told me I should check our Ipernica and that he'd set up a meeting with Graham Griffiths for me the next day. I had a pretty standard meeting, didnt think much of the IP assertion business and questioned whether they'd have the corporate and fiscal discipline to go the demanding distance that commercialising technology extracts from pretty much every venture I've been involved in. I flew back east and forgot about it.
2 weeks later I had a call from Graham who suggested I call/talk with people such as Rob Newman and a few others. I did this, and the penny dropped that this was potentially much more than just useful pictures or a high def Google Maps.
I called up the analyst and gave him the order to buy up to Xm over the next 2 months but the limits I placed were a bit tight and it was taking too long and we got about 80% of our target. Over the next 4 years, I meet with management regularly to monitor their progress though the minefield of development, commercialisation and inevitable need for capital.
And having been both an buy and sell side analyst and ECM director for many years (left 12 years ago), I built a fairly detailed but standard corporate model and spreadsheet which I have been using to maintain a picture on absolute and relative valuations and risk assessments within my overall portfolio.
Its not a perfect system by any means! The broker still reminds me of when we sold 2m at about 15c after it had been languishing at 3-6 for nearly 2 years. But this was because I was preparing for a CR (which didn't eventuate).
But the model does help identify many potential issues. And it did highlight a key ratio for me when they came out 2 weeks ago. A lot of investors have been focused on their cash holdings but this must be done in conjunction with their Unearned Income. When the ratio dips below 1.0, the company is essentially dipping into customers prepaid sales cash which is OK if its temporary but this was trending in NEA's case and the financial free-board was going to get pretty skinny ahead of CF positive early next year.
So I called a few people about it, confirmed that something was being done, tried to get a foot in the door but Macquarie and I didn't get along last time and they remembered (!). So I had to sit back and wait for it to go down.
Fact is, NEA couldnt meet its expanding growth objectives without additional capital. Every CFO has their own short, medium and long term capital/business models, which they use to determine the needs of the organisation versus the strategic objectives and KPI's that the Board sets. Using variations of CAPM, the models can then optimise the specific capital requirements. Its not a very good absolute tool but a great relative one...it can easily tell you if equity is cheap or expensive and can help assess the financial risk and rewards of taking particular CR options.
There is little doubt that the SP of even $1.60 exceeded their models assumptions so when MC and CG bought them a underwritten deal, it would have been literally insane of NEA to refuse.
Fact is that many/most companies are not that great at ECM; its not their forte and they generally have little negotiating power. An underwritten deal backed by some of Aust's best institutional fundies is almost impossible for a board to pass up on.
Many here on HC think its easy for a coy to negotiate price. Well, its not. The instos/brokers set it and that's that. NEA could have done a book build and chanced getting a better price...maybe $1.68, but this can also backfire with smaller, less fungible companies.
It would have taken NEA nearly 3.5 years to accumulate $65m (net) organically. This raise brings all of that forward and can now get into new regions and expand their technology well ahead of time. It takes real capital to stay at the front of global technology initiative....which just got bigger; way bigger than most here appreciate.
When RN mentioned that they were researching AI prospects within their immense data base, that was another 'penny-drop' moment. We wont see the potential scope and scale of this for maybe 3-4 years, but I suspect it could easily be measured in the $billions. The FANG companies are spending $Bs on AI and many will need to hook into NEA's unique and systematic 3-D digital geospatial data base.
Its big, real big. And I'm very pleased that they now have the capital to go at it and bring its potential massive value forward for all shareholders. This opportunity is easily worth many, many times the small pricing discount of the CR.
NEA have been great managers of our interests and capital todate. Please dispense with the childish pricing banter and back them. You will not even notice the discount in 2 years time, but you'll sure as heck notice its value-add.
Apologies for this stupifingly long-winded rant.
Cheers,
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