From a long-term shareholders’ perspective, Vela Technologies may as well be trading at zero.
The company has made some terrible investment decisions, and investors are paying the price. In their last quarterly update, the executive director suggested the UK small-cap market was the problem. This argument has some merit, but the real problem is disastrous investment selection and poor portfolio management.
Investors are understandably calling for a change in management after shares lost 93% of their value over the past five years.
Vela Technologies’ recent RNS archive is a catalogue of disasters and bad news. Quarterly investment updates reveal a steady decline in the portfolio’s value. The investment company has revealed that private company investments are going into administration, and one of their other holdings, Tribe Technology, recently announced it was delisting.
There are valid questions about the overall strategy and the leadership team’s ability to manage a portfolio of early-stage companies.
An investment in NASDAQ-listed Conduit Pharmaceuticals was an utter catastrophe, with a multi-million dollar investment declining to be worth under £100,000.
In a recent update, the company said it planned to recycle capital into new investments while avoiding crystallising material losses. This isn’t very encouraging, as it suggests they lack confidence in their current portfolio.
As an investment company, Vela should seek out innovations and exciting management teams to make meaningful investments. Instead, through their most recent investment, they have effectively outsourced this job to another investment company, Igraine.
It seems like the Vela management team has given up.
Vela recently announced the sale of a proportion of their stake in Ensilica at 46p, netting just £10k profit after holding the stock and adding to it since the beginning of 2022.
The company said it needed the cash for working capital purposes. This means the company is selling down investments to keep the lights on, which clearly isn’t a sustainable strategy.
After the sale of the stake in Ensilica and the delisting of Tribe Technology, the company’s listed equity portfolio is now only worth around £1m.
If things keep going as they are, it is only a matter of time before they delist or conduct a heavily discounted placing that obliterates any remaining value in shares. It’s also difficult to see investors having much interest in funding a placing at this point.
Vela desperately needs a big winner in its portfolio. Unfortunately, where that comes from isn’t immediately obvious.
Vela has invested heavily in Aquis-listed Igraine and is required to make further cash investments in the company, totalling £150,000, through convertible loan notes. There is an option for Vela to invest a further £300,000, but they would have to flatten several of their other positions to do so.
Igraine has exclusive investment rights in battery storage company GEM Energia Limited, which is establishing battery systems across the UK. Vela’s investment in Igraine will likely fund the construction of this network. It’s an interesting business, but it’s capital-intensive and unlikely to produce any meaningful returns for many years.
Vela Technologies is on thin ice.