4DS - Anything but Charting, page-19250

I think you are on something.

The announcement was terrible.
It could easely be interpreted as the end of the company and came after a few worrying signals.


Negative aspects :

1 - The time needed to settle an agreement with Imec.
It gave the impression that it was not easy (remember the sauce : "4DS agreement is terminated"). And they have to put a royalty in the balance above the 0,6 million dollars fee.

2 - No certainty about the mask problem
No plan B mentionned => if it fail we are dead.

3 - No market for SCM.
Does that mean that they had contacts with potential biders and no results ? If then, what is plan B ?
Just with a single sentence, they seemed to declare that the company strategy from the biginning was in fact wrong.
Is that it ? If so, what is the new strategy ?
They gave a few clues here : Find a better performing cell that can be tuned to serve every use. OK with that.

4 - Insiders selling.
In retrospec, it is clear that DM and Desu sellings was motivated by something not working as planned. Even JD departure and subsequent selling could be interpreted as meeting with a roadblock (he could have made a transfer to family, though).

More worrying was the fact that they didn't update the Top 20 in the final Annual Report. This report should have shown the new Top 20 as for October 2021.
Did they want to hide something ? Lots of heavy weights selling ?

5 - Important employees or director leaving the company.
Desu seems to have left even if he still is a consultant (probablly under strict NDA).
Mr. Ting Yen, the new vice president for process integration also seems to have disappeared.



Positive aspects (not provided by 4DS):

1 - The complete faillure of 4DS will seriously damage the reputation of vdH and GA. This will not happen , imo.

2 - It seems that the tech worked last year, but not as fast as they wanted => more developpement at the cell level was needed to reach a read speed an order of magnitude above what they get from the previous technology (as per the August technical update).
If so, we already have something.

They could have a reasonnably derisked investment case with what they already have and what they hope to reach next year.

In fact, a new and clear investment case in a separate announcement would have allowed shareholders to ponder the real risks.
But we have nothing like that. No real strategy and no alternative strategy whatsoever.
And we know they have one or more. There are no company that doesn't make contingency plans.

From what I understand, the previous cell worked and could have been put in a megabit array.
But that was not good enough to convince a potential bidder. They had to take the technology at another level and some problems arised.
But they had already something ("endurance several orders of magnitude better than NAND").

If so, insider selling could have been motivated not by a lethal technical problem but by the knowledge that the technology, as it was last year, could only be useful for niche application.
Hence a price of $ 0,15 was all that could be expected.

If we already have a company that could be sold for 100 or 150 millions dollars, and we want to take the technology further to make something really disruptive with a price above 500 millions $, then the picture change completly.
We have an investment case.

But what was implicitly validated in the last update was an "all or nothing" scenario, with the company price droping to zero if the third platform lot fail to reach the performances they are looking for.

To be fair, they did give some positive information by explaining the testing problem.
They said that this testing problem could be solved by making a megabit array with an access device.
= > achievable = good news.

But making this megabit array needs a new mask and probably one or two more iterations to see if it could be repeated => renewed riskfor 2 years
If the mask eching problem is solved in the next three months, the shareprice will go up.

They have a good chance of solving that. But other problems could arise.


To stay the course for two more years, what is missing is a real investment case.

- What the company is worth now with a potentialy functionning 45 nm cells array.
- What could be the value of the company if we reach smaller nodes and higher speed ?
- What could be the real market for this technology or what potential bidders are asking and are ready to pay for.


I don't think they intentionnaly made the price tanking.

They just dont mind about the share price.

They have not put their own cash in 4DS, just a little part of their salary paid in shares (salaries that can be tuned to allow that without financial sacrifice).
Shareholders are the only ones to have real skin in the game.
(JD did put his own money in 4DS, but he left and is probably in free carry right now).

There are only five people working at 4DS Inc in Fremont. Almost all are scientists.
That put a bias on the management perspective. They dont really know what financial risk is, imo.

(Not to say that VDH and GA couldn't pursue complexe corporate strategies)


That said, the possibility exist and cannot be completly dismissed that they have already a new strategy that imply to get rid of retail investors.

Unfortunately, a few facts could point in that direction :
- The fact that bad news and price destruction came just before the programmed end game, and before the AGM with potential corporate reorganisation / transaction in the horizon.
- The fact that there is no investment case explained wich could means that they don't need money and are ready to sacrifice shareholders for any kind of corporate transaction / Reorganisation.

Tanking the share price to make a low ball offer (0,20) more palatable seems a reasonnable proposition.

Could be.
But I think the main explanation is that they are just exhausted and want to finish with it.
4DS shareholders are not their priority.




WHAT TO DO

This is just for me.

Absence of clear strategy and visibility => trading intead of holding LT.

Reverse to long term holding if there is a plan :
- A clear explanation of technical choices and options.
- A documented analysis of commercialisation perspectives
- The different corporate strategies that could be implemented in each cases.

The usual Company Presentation won't be enough.

But do they really want to raise money ?
Do they really want to continue for two years ?Or even for one year ?

Visible unwinding (departure of employees, botched AGM notice and annual report) and possible absence of CR indicate that they wont go any further.

My take : One last try and they will sell it at whatever price in the next 6 or 7 months.



No financial advice.





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