Letter being sent to Tesserent

HERE IS THE LETTER I AM SENDING TO TESSERENT TOMORROW (2 AUGUST 2016)


1 August 2016


Attention: Mr Keith Glennan
Managing Director
Tesserent Australia Pty Ltd
Level 2, 683 Burke Road
CAMBERWELL VIC 3124




Dear Mr Glennan,

RE: Performance of Tesserent

I write to you regarding the performance of Tesserent since listing on the ASX earlier this year.

I am a minority shareholder in Tesserent.


I wish to voice my concern about the performance of management.

The most recent financial results released to the ASX indicate an apparent decrease in sales of about 10%.
Given the recent acquisition of Blue Reef in May 2016, which was reported as being earnings accretive, one wonders how a decrease in sales can be explained for this quarter.  Whilst one can accept that the marketplace is competitive, the tail winds behind the Tesserent business could not be stronger.  Cyber security is a hot issue for many businesses and government organisations these days.

To put it bluntly, if you can’t sell internet security software in this marketplace, you couldn’t sell water to a man dying of thirst.

The only conclusion seems to be a poor sales / marketing strategy.  Sales and marketing is the direct responsibility of the management at Tesserent.

I would also raise communications with shareholders, or a lack thereof, as an issue.  However, I am prepared to accept that as a newly listed entity, the management of Tesserent have little experience at engaging with shareholders.

I would like:-

• An explanation for the apparent decrease in sales of 10% for this quarter?;
• A summary of the marketing / sales strategy being adopted to grow the Tesserent business. In particular, why is an acquisition strategy being adopted?  Given that Tesserent already has a proven product being used by businesses and government organisations, why not pursue an organic growth strategy?  Why are management so keen on pursuing acquisitions?  Does this suggest that the Tesserent product does not have a sustainable competitive advantage?
• If management is insistent on an acquisition growth strategy, whether further capital is likely to be raised and if so when?

I am happy for these questions to be addressed in the Annual General Report or via communications released to the ASX.

I do not mean to be offensive.  As a shareholder in Tesserent I want the business and management to do well.  However, given that the Tesserent IPO was so heavily oversubscribed, many shareholders have been scratching their heads regarding the share price performance of Tesserent over recent months.  The most recent earnings result only feeds into that disappointment.

I believe management needs to tackle this issue head on, and provide more direct, detailed and regular communication to shareholders about:-

• (a) Its sales / marketing strategy;
• (b) the most earnings results, which appear disappointing;
• (c) why it is pursuing an acquisition strategy for growth.

I otherwise wish Tesserent every success.

Yours sincerely,