Allied Minds has announced that Jill Smith is stepping down as president and CEO, with Mike Turner (general counsel) and Joe Pignato (CFO) stepping up to become co-CEOs in addition to their existing roles. This further reduces costs in line with the company’s narrower strategic scope. Otherwise, previously announced cost-reduction measures are proceeding as planned and the only portfolio update was to confirm that Allied Minds is hopeful of successful funding rounds at HawkEye 360 and Federated Wireless in the near term. The shares trade at a 12% discount to our estimate of FY18 NAV and, with clear milestones for the core assets in 2019, the investment thesis remains focused on the prospects for HawkEye 360, Federated Wireless and Spin Memory.
The latest announcement follows the April strategy update, with Jill Smith’s departure recognition that the company is now in run-off mode, with the savings in accrued salary and bonus costs material in light of cost-reduction targets.
Other than the CEO’s departure, the company reported a number of business updates since April, including: 1) good progress towards achieving the planned reductions in annualised costs, consistent with the strategy outlined in April to reduce costs to $5–6m annually; 2) further reductions in HQ headcount are anticipated from the deconsolidation of portfolio companies following completion of planned funding rounds; 3) current HQ space will be sublet; and 4) the current LTIP scheme is being retired in light of the above strategic changes (the historical LTIP schemes remain in place, although only a small proportion would vest at the current share price).
The investment thesis remains focused on Allied Minds’ marshalling its limited cash resources (FY18 $50.6m) to deliver commercialisation of its portfolio companies. In this light, it was reassuring that Allied Minds stated that it remains well placed to conclude successful funding rounds at HawkEye 360 and Federated Wireless in the short term.
Following our recent rebasing of the portfolio valuations (26 April 2019), Allied Minds shares now trade at a 12% discount to our estimate of FY18 NAV of 90.7p (unchanged).