Tern plunges as Device Authority announces USD7.3 million fundraising
Tern PLC, an investor in early-stage ‘internet of things’ technology businesses, saw a significant drop in its shares following the announcement of Device Authority Ltd’s plans to raise up to USD7.3 million. The London-based investor’s shares tumbled 22% to 3.33 pence each in London on Wednesday morning.
Before the fundraising initiative, Tern held a 54% shareholding in Device Authority, a Reading-based software firm. The Series B fundraising effort aims to support Device Authority’s growth strategy beyond 2024, including expanding its activities in the United States.
Under the fundraising agreement, Ten Eleven Ventures will invest USD7.0 million in new equity, and Alsop Louie Capital 3 LP will contribute USD300,000 through the conversion of short-term loans. The first installment of USD4.0 million is expected to be completed by the end of 2023, while the second installment of USD3.3 million is contingent upon approval under the National Security and Investment Act.
As a result of the fundraising, Tern’s interest in Device Authority will decrease to 30%, valued at approximately USD7.4 million. The proceeds from the fundraising will be used by Device Authority to repay USD175,000 in short-term loans owed to Tern.
Furthermore, USD2.1 million of Device Authority’s convertible loan notes will be converted into equity. Tern will also convert its entire USD1.0 million of convertible loan notes into equity. After these conversions are completed, Tern’s equity stake in Device Authority will be around 36%, valued at around USD7.7 million.
Chairman of Tern, Ian Ritchie, expressed satisfaction with Device Authority’s progress. With the substantial investment from knowledgeable investors, both Tern and other shareholders believe that the firm’s advancements, especially in the United States, will be accelerated. Ritchie stated that Tern’s board is continually assessing portfolio companies for the potential value that can be achieved through an immediate exit versus further growth capital. However, he emphasized that now is not the right time for Tern to sell its interest in Device Authority, considering the current valuation landscape and the progress expected through this investment.
The completion of the fundraising rounds and Tern’s equity conversion will allow Device Authority to pursue its expansion plans and solidify its position in the industry.
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