Tekcapital stock surged after portfolio company MicroSalt’s IPO, and new catalysts are just around the corner.

Tekcapital (LON: TEK) shares soared from just under 7p at the start of 2024 to 17p piece in mid-February, buoyed by the successful IPO launch of promising portfolio company MicroSalt. However, the company’s stock has since fallen to 8.1p, in line with MicroSalt’s market price discovery, today’s Belluscura news, and perhaps also driven by a placing that should see the company financed for some time to come.

For context, MicroSalt ran to as a high as 114p on 16 February having launched at 43p — and the stock is still changing hands at 71.5p after a period of plateau.

It’s probably fair to say that this price action is indicative of two things: a market starved of IPOs, and the difficulty in fairly assessing the value of MicroSalt’s potential given its relatively early stage status, unique product, and top end partners.

The TEK placing

TEK raised £2 million on 29 February at 10p per share — another example of a quality company given the London financial treatment — with £300,000 to be used to complete the build-out and commercial deployment of Guident’s new Remote Monitor and Control Centre, and £500,000 for a new investment into a Generative AI portfolio company opportunity.

The company also repaid a £600,000 (plus interest) loan entered into by subsidiary Tekcapital Europe with portfolio company Innovative Eyewear. The rest of the funds raised, after expenses, are to be used for working capital requirements.

Executive Chairman Dr Clifford Gross notes that the funding will ‘enable us to strengthen our balance sheet, complete the build-out of Guident’s new RMCC to facilitate servicing its growing client base, and form a fifth portfolio company in the Generative AI space.’

There are plenty of factors to unpack here. To start with, MicroSalt should now be self-funding, having raised £3.14 million at the IPO — and TEK continues to hold more than three quarters of its shares.

The placing may have felt a little unfair to long-term holders at the time, but Tekcapital is operating in a difficult market. Taking advantage of the heightened interest around the company to pay off a debt that would have been a long-term anchor, and getting the cash in place to advance its strategy while also getting the money to keep all typical expenses at bay is not a bad compromise.

Tekcapital’s share price is now below that 10p placing price, and in hindsight this leaves TEK better positioned for growth through 2024.

Upcoming catalysts for TEK shares?

While TEK also has interests in Belluscura and Innovative Eyewear — which both hold significant promise over the longer term — there are three potential near-term catalysts for investors to keep an eye on:

• The next MicroSalt contract
• TEK’s AI investment
• Guident’s RMCC update

MicroSalt already boasts contracts with some of the biggest names in the health business, and an update on the success of these current partnerships, or perhaps a new contract with another partner could see a positive corresponding effect on TEK.

The upcoming generative AI investment will also be interesting — presumably this will be a university spin-out as is the corporate model, but having raised at 10p, shareholders will want to see an investment in a company where the juice will be worth the squeeze.

But perhaps the key catalyst to watch is 100% owned Guident, a portfolio company which aims to offer competitive advantages for Autonomous and Electric Vehicles fleet operators via a Remote Monitor and Control Centre (RMCC), utilising artificial intelligence and secure, ultra-low-latency network connectivity.

The RMCC centre, which is being finalised via the £300,000 raised, will monitor autonomous vehicles, and also provide support services such as calling out the emergency services, taking control of the vehicle, moving it out of harm’s way, and even providing real-time comms with passengers.

There are two key economic moats surrounding the portfolio company, which is crucial given the extreme competition in the space.

The first is that it has one of the lowest teleoperation video latencies in the industry, or in other words, video from an AV gets to the RMCC faster than rivals. Guident remains the only teleoperations company with patented systems and methods for remote monitoring and controlling autonomous vehicles, robots, and drones.

The second is its regenerative shock absorber tech — Guident has established a wholly owned subsidiary named Revive Energy Solutions — in response to significant market traction for the tech, including a collaboration with a leading tyre manufacturer and successful proof-of-concept testing results.

The company plans to produce electromagnetic regenerative shock absorbers with advanced energy densities which are capable of capturing and utilising a vehicle’s vertical movements that are part of everyday driving on public roads, and which are currently dissipated as wasted heat energy.

Importantly, Guident has already informed investors that ‘progress is underway with multiple car manufacturers, to assess the manufacturability, cost, and the best approach to rapidly bring the technology to the world market.’

Guident has three key strategic partnerships:

Space Florida and Novelsat — the company was awarded a large grant from Space Florida (independent established by the State of Florida to advance aerospace tech businesses) in 2023. The purpose of the grant was to implement satellite communications as an additional connectivity option for AVs, and the project is now on track to demonstrate teleoperation over satellite communication links in Q2 2024 — or in other words, any time from now to the end of June. This a joint effort with Israel-based Novelsat, a global provider of innovative satellite communication services.

Adastec — Adastec’s flowride.ai system enables SAE Level-4 operation for buses manufactured by Karsan and Vicinity Motor Corp. Guident’s teleoperation solution, integrated with flowride.ai, represents what the two companies see as a ‘breakthrough in autonomous transportation,’ offering full-scope autonomous vehicle monitoring and control coupled with fleet management. Beginning this year, Guident’s RMCC solution will be integrated into Adastec’s automated buses being deployed in the US.

Auve Tech — Guident recently announced a partnership with Estonia-based Auve to integrate its RMCC teleoperation system with Auve’s MiCa autonomous shuttles (already deployed in Europe and Asia), and this partnership has now moved to the implementation phase. This integrated tech will be in place in the first Auve shuttle which has been shipped into the US under Guident’s recently received National Highway Traffic Safety Administration testing approval.

Over the next two years, Guident’s research and development program will develop a roadmap to improve remote control operator effectiveness and implement augmented reality features for enhanced situational awareness and passenger communication. The business also recently adopted a software architecture framework that should help to ensure scalable development, smooth feature releases, customer upgrades, and efficient software license management to support future growth.

The portfolio company is hosting the upcoming National US Autonomous Vehicle Day on 31 May. For perspective — as announced in a recent UKIM interview — Guident is currently organising a US private equity funding round. It’s engaged a US investment bank to facilitate the capital raising which is expected to provide an uplift to Guident’s current valuation.

The round is expected to be completed by the end of Q2 2024, and will have the benefit both of funding Guident but also lifting a financial constraint from Tekcapital’s shoulders.

Tekcapital going forward

Tekcapital is now capitalised, will see strong growth in Guident, and is set to enjoy success with MicroSalt through 2024. Then there’s Belluscura and Innovative Eyewear in the portfolio — and a yet to be named investment into an AI start-up.

In a market where AI dominates the discourse, Guident and this new AI investment could bring TEK back to a premium valuation, and investors know that multiple positive RNSs are going to drop this quarter. 

Of course, the company continues to operate in a difficult market where a combination of the US-based AI bubble and higher interest rates have created record discounts to NAVs. But when rates start falling and the NASDAQ titans fall back to reality, the Tekcapital re-rate could happen fast.

Analysis by broker Hargreaves Lansdown found that those who invest earlier in the tax year produce better returns than those who wait until the end.

“ISA early birds get the returns,” said Sarah Coles, head of personal finance, Hargreaves Lansdown.

With the end of the tax year fast approaching, many will be making preparations to use their ISA allowance before they lose it. However, it is those who choose to invest in the early days of the tax year rather than the last days that earn the best returns, according to Hargreaves Lansdown. 

“The earlier you use your ISA allowance in the tax year, the better, because your investments have longer to grow, and are protected from tax straight away. Over the past ten years, investing on the first day of the tax year could have left you £38,000 better off,” Coles said.

HL’s analysis found that if an investor invested their full ISA allowance in the Legal & General International Index fund on the first day of the tax year every year for the past decade, they would have seen their investments grow to £360,500. This would compare to £322,500 if they had done it on the last day of the tax year.

Sarah Coles explained the benefits of having your money invested from the beginning of the tax year, and also the potential constraints of doing so:

“Early bird ISA investors who have a lump sum to invest at the outset gain up to a whole year of dividends and potential growth in the stock market ahead of those who leave it until the last minute. And because their investments are protected from tax, they don’t risk having to hand over any of these extra gains to the taxman,”

“The early birds aren’t sitting pretty every tax year, and at times of market falls, those who got in towards the end of the tax year will have dodged the drops earlier on. However, the fact the early birds do so much better over time shows how these years are soon forgotten among average stock market performance.”

Tesla shares fell in overnight trade after the electric vehicle manufacturer released disappointing sales figures.

The EV maker’s shares closed down 4.9% at $166 after announcing a 20% drop in sales as the continues to struggle with falling demand for its vehicles.

While a number of factors influence sales at Elon Musk’s Magnificent 7 tech company, investors are appearing to grow tired of faltering sales as the share price continues to decline.

“Ongoing disruption in the Red Sea is just one of the production issues plaguing Tesla, which have contributed to a 20% drop in sales quarter on quarter, with deliveries of just under 387,000 vehicles coming in significantly below market expectations,” said Susannah Streeter, head of money and markets, Hargreaves Lansdown.

“Tesla may have pulled off the tricky manoeuvre of stealing back the crown as the biggest seller of electric vehicles from Chinese rival BYD, but it’s not been enough to arrest a sharp fall in the share price as investors expressed disappointment with the deliveries number.”

Despite earning a place as a ‘Magnificent 7‘ tech stock, Tesla’s stock performance has not lived up to the title.

Tesla shares are down 14% over the past year, by far the worst of the ‘Magnificent 7‘ that includes, Microsoft, Apple, Meta, Alphabet, Nvidia and Amazon. For context, Meta is up 133% over that period.

Tesla’s efforts to push into AI are compounding problems for the car maker, as spending on AI erodes margins already under pressure from falling sales.

“The fabled Magnificent Seven group of tech giants is now splintering off as a playground style popularity contest evolves, based largely on firms’ artificial intelligence credentials,” Streeter explains.

“As the famous five of Nvidia, Meta, Microsoft, Amazon and Alphabet head off on an AI adventure, Tesla and Apple still appear to be searching for the right clues to take advantage of this new world of opportunity.”

Although yesterday’s sales number and Tesla’s general financial performance don’t make for pretty reading, Elon Musk has consistently produced innovations that gain commercial traction. We will learn more about Tesla’s AI endeavours in due course, and loyal long-term investors will hope for another Musk triumph.

Those who liked Tesla at $200 will love it at $166 after yesterday’s drop. 

Scientific instruments manufacturer Renishaw (LON: RSW) was boosted by press speculation that Siemens might bid for the company and the share price rose 100p to £43.50. However, after the market closed Siemens announced that it did not intend to table a bid for Renishaw.

The two founders and main shareholders are both more than 80 years old. Sir David McMurty owns 36.3% and Daniel Deer holds 16.6%.

The two men put their shares up for sale in 2021 and that set off a formal sale process. They were keen that a buyer would not change the way the company is run and the spending on research and development. Siemens was mentioned as a possible buyer that that time.

A suitable buyer was not found, and the two men, who met when they worked at Rolls-Royce, said that they had no intention of selling shares following the ending of the sale process. They did recognise that they would need to think about what to do with their shareholdings over the medium-term.

The share price is around two-thirds of the level it was at the time of the formal sale process. Renishaw is valued at £3.17bn and it is a constituent of the FTSE 250 index. It is forecasts to make a pre-tax profit of £133.2m on revenues of £682m, with an increase in pre-tax profit to £157.7m next year.  

Superdry shares were sharply lower on Tuesday after talks with the group’s CEO about making an offer for the remaining shares he does not already own failed to produce a deal, leaving the company in a precarious position.

Superdry released a statement late on Thursday last week announcing Superdry founder Julian Dunkerton had not made a formal offer for the company. The announcement also alluded to a possible capital raise at a significant discount to current market prices.

“The Company remains in discussions with Julian Dunkerton in respect of alternative structures, including a possible equity raise fully underwritten by Julian Dunkerton, which would provide additional liquidity headroom for the Company’s turnaround plan. It is expected that any equity raise would be at a very material discount to the current share price,” Superdry said in a statement.

The threat of a possible fundraise has sent investors running for the hills and Superdry shares were down around 50% at the time of writing.

“Investors finally had a chance to price in a barrage of bad news from Superdry which was released after the market close last Thursday. The share price slumped by 47% which implies disaster,” said Russ Mould, investment director at AJ Bell.

“Julian Dunkerton has withdrawn his attempt to take the troubled retailer private which means Superdry now faces the prospect of having to conduct a heavily discounted fundraising to stay alive, conditional on delisting the group from the stock market.

“It has secured additional borrowing facilities that come with a chunky interest rate but that’s only going to be a small plaster on a big wound – not enough to save the day.

“Investors now appear to be dumping the stock to get back anything they can, even if it means crystalising a loss. In the absence of someone else throwing their hat in the ring and trying to buy the business, we can probably wave goodbye to Superdry as a listed entity.”

The FTSE 100 again flirted with all-time highs on Tuesday as Middle East tensions sparked a rally in oil, taking London’s oil majors with it.

London’s leading index traded above 8,000 in early trade before falling back to print 7,972 at the time of writing.

“The ongoing rise in oil prices amid a tighter supply outlook is a worry for corporates and consumers as it is a major inflationary force,” said Russ Mould, investment director at AJ Bell.

“A 0.8% advance to $88.08 per barrel puts the commodity price at its highest level since October 2023 and explains why Shell and BP were among the biggest drivers for the FTSE 100 today. Commodity producers account for a large weighting of the FTSE 100 and the index typically does well when these stocks are bid up.”

BP gained 2.8% and Shell jumped 3.2%. Stronger gold prices helped Fresnillo 6% to the top of the FTSE 100 leaderboard. Miners Glencore, Rio Tinto and Anglo American had a good start to week after a strong showing from Asian indices over the long weekend.

In the absence of any major catalysts today, lighter trade in and around the Easter holidays may be what the FTSE 100 needs to break through to record highs. Later this week, the US jobs report will be in focus for any indications of when the Federal Reserve may move to cut interest rates.

“The Federal Reserve will be watching the commodity market like a hawk as part of its decision-making on interest rates. It has a dual mandate of controlling inflation and getting the US as close to full employment as it can. Markets currently believe it can pull off the treble of cooling inflation, managing a soft landing for the US economy and cutting rates,” Russ Mould said.

“If higher oil prices threaten to rock the boat, investors will certainly not want any drama from job figures this week.

“The number of job openings in the US slipped in January and the same is expected again when February’s figures are reported this afternoon. Friday will see further jobs data, covering non-farm payrolls, unemployment and wage growth. Markets will be looking for a figure that is neither too hot as an overheated market might postpone rate cuts, or too cold as disappointing data would increase speculation of a hard economic landing.”

Should this week’s job data strengthen the view that major central banks will cut rates in the near term, one would expect the global equity market rally to continue.

The UK has lagged behind major US, German and Japanese indices in terms of breaking to fresh record highs – but it may soon hit the headlines if the all-time record closing high of 8,014 is breached.

The FTSE 100’s record intraday price is 8,047.