"Not sure how long you have been following this stock but...

"Not sure how long you have been following this stock but shareholders were already offered to increase their position in the SPP just a month ago at 0.45c, which is ~11% premium to the issue price used for the earn-out conversion."

That's a separate matter, and in all probability is a function of tax-loss selling close to financial year-end, in a notoriously illiquid stock. (There was certainly nothing tangible that occurred that could have driven down the intrinsic value of the company by 9cps (45cps to 36cps) in the space of a mere few weeks).

My post related to the fresh investment decision available to shareholders following the 2 June announcement concerning the amended earn-out agreements.

As for how long I've been following the stock, I acquired shares after it listed in 2016 and sold out in mid-2022 when I saw global monetary tightening gaining momentum, combined with the Pakistan issue adding to the headwinds for the company.

So I like to think I more than adequately versed with its investment attributes and risks.


"How many time do SH need to top up to avoid dilution with this stock?"

Well, if one thought that the business was attractively valued at 45c, then the market offering the stock at a level 20% lower should be even more attractive. (The Buffet/Munger hamburger analogy: When the same hamburger is on sale for a lower price, the rational thing to do is to want to buy more hamburgers, surely?)

If it is the same business it was just a few weeks ago, which owner of the business would complain about the opportunity to buy additional shares 20% cheaper?


"I think you are too kind with management. I agree with @Adimadis that they dropped the ball by assuming they could do another CR at higher price."

I'm no apologist for management, but that they miss-stepped in terms of having to issue fresh equity (and no doubt about it, they did miss step) is really a function of two or three major extraneous factors, which they would have had to be clairvoyant to anticipate:

1.) The outbreak in 2022 of political and civil unrest in Pakistan (which had an impact not only on the underlying performance of one of their most prominent investments, i.e., Zameen, but also the Pakistan currency, which impacted A$ translated revenues and cash flows);

2.) Rising inflation and interest rates globally, which is an anathema to the valuation of long-duration growth technology businesses; and

3.) The buyers' strike that has occurred in small- cap (and especially micro-cap) stocks in recent months, which is aggravating tax-loss selling leading into financial-year end.

So yeah, they may have thought they might be able to do another capital raise at a higher price, but heck, they aren't alone in being wrong: the parade of economists who accurately foresaw the geopolitical events and interest rate surges of the past 6 to 9 months will be a very small one indeed.

Had those extraneous factors not transpired, I think the company would be raising capital at prices double, and probably triple, their current levels, and no one would be having this discussion.


"They've successfully done CR almost every year since IPO (the cynic in me would say it's part of their business model) but got caught in the unprofitable tech sell-off this time."

You don't need to be cynical to think that's their business model.

Definitively, it is the model.

Seeding and funding a portfolio of fledgling, wannabe-be unicorn businesses is a capital hungry undertaking.

The theory is that, as those underlying businesses grow and approach break-even points, their intrinsic value rises correspondingly, which gets reflected in the market value of the parent entity, thereby permitting subsequent funding rounds to be conducted at successively higher share prices.

And for several years, that theory was verified very well by the reality, until those left-field extraneous factors listed above, disrupted the process this year.

For context, here is the company's capital raising history, for amounts raised at various share prices:




As can be seen, between the IPO in 2016, and 2022, the company issued new equity at successively higher prices, viz. $0.50 (IPO), $0.55, $0.65, $0.80, $1.23, and twice at $1.50.

Importantly, two-thirds of the equity issued occurred at prices above $1.23 and For further context, the average price (weighted by he amount raised) at which equity has been issued is $1.06/share.

The equity issued this year accounts for just 10% of the total equity issuance since IPO.

So credit where credit is due: when it comes to assessing FDV management's capital management, I score them a pass given all was going perfectly to plan until they - like just about all capital market practitioners - were torpedoed by the unforeseen events of the past six months, which forced their hands in recent weeks.


"Out of curiosity, what's holding you back from pulling the trigger on this stock?"

Nothing, really.

The reason I'm revisiting the stock is with a view to pulling the trigger.

I think the medicine has been taken and the stock has gone from valuation euphoria two years ago (right at the time management was flogging new shares to the market, bless them) to being totally hated and feared today.

Performing a detailed valuation exercise on each of the following businesses is not easy, but based on on my spidey senses, I cannot help feeling that the portfolio is more valuable than FDV's current $130m EV implies: