Driver monitoring system designer Seeing Machines (SEE:AIM) is pulling the plug on previous plans to separate its Fovio car market business and will instead keep full ownership and control in-house.
It has raised £17m (a £15m placing and £2m open offer) from equity investors who are now funding fully, and will therefore benefit fully, from the roll-out of its leading-edge technology.
This comes as no real surprise to Shares, this option was clearly up for discussion when we spoke with Seeing Machines' CEO Ken Kroeger in early October, and we hinted as much in the 13 October.
SPIN OUT IDEA
The original plan was to spin Fovio off as a separate business, with Seeing Machines providing the existing and prospective business and technology and a selection of external investors (industry, technology and venture capital) contributing cash with a view to an eventual NASDAQ listing.
Several cornerstone investors had been identified as early as May 2016 and a non-binding agreement was struck with a US-based investment firm with extensive experience in the automotive technologies space. A second investor agreed to follow soon after.
STICKING POINTS
But negotiations with venture capital (VC) investors started to reveal some big problems to this path. For a start, the VCs required core intellectual property to be transferred to Fovio rather than receiving a perpetual licence. That was not all:
> They also required that key staff be permanently transferred rather than seconded.
> They wanted a wider remit than Seeing Machines was prepared to allow, including changing the term of the company's existing agreement with CAT in industrial vehicle markets.
'Potential technology investors were keen to co-opt the technology for their own ends,' explains Lorne Daniel, technology analyst at FinnCap. 'For example, insisting that the technology stack moved to their platforms, abandoning significant past development and success.'
BIG OPPORTUNITY
By funding Fovio internally, management and investors will retain total control of the IP, strategy, staff, development expertise and data derived, as well as all of the eventual profit from the huge and lucrative OEM (original equipment manufacturer) automotive prospects.
'This is one of the biggest markets for Seeing Machine’s technology,' believes FinnCap's Daniel. With roughly 100 million vehicles produced worldwide each year. Assuming a $40 price per Fovio chip system, this implies a total addressable market for Fovio of circa $4bn a year.
'Recent incidents highlight the urgent need for this technology, including the conviction of a trucker who killed a family on the A34 while distracted by his mobile phone and the crash of a Croydon tram whose driver appears to have lost concentration or consciousness,' Daniel says.
