Tern PLC said on Wednesday that Device Authority Ltd is aiming to raise up to $7.3 million.
Tern PLC shares dropped 22% to 3.33 pence each in London on Wednesday morning.
Prior to the fundraising, the London-based investor in early-stage ’internet of things’ technology businesses held a 54% shareholding in Device Authority, a Reading-based software firm.
The Series B fundraising effort is aimed at helping Device Authority ‘to grow in line with its strategy beyond the end of 2024, including expanding its US activities,’ Tern said.
Per the fundraising agreement, Device Authority will receive $7.0 million from Ten Eleven Ventures in new equity investment, and $300,000 from Alsop Louie Capital 3 LP via conversion of short term loans.
Completion of the first tranche of $4.0 million is expected before the end of 2023. However, the second tranche of $3.3 million will be contingent upon approval pursuant to the National Security and Investment Act and acceptance of this approval by Ten Eleven Ventures.
After the second tranche is completed, Tern’s interest will drop to 30%, valued at roughly $7.4 million.
Device Authority will use the proceeds to repay $175,000 owed to Tern for short-term loans.
Along with fundraising, $2.1 million Device Authority convertible loan notes will be converted into equity.
Meanwhile, Tern will convert the entirety of its Device Authority convertible loan notes into equity, representing a total of $1.0 million.
Following the completion of the first tranche of fundraising and the conversion of Tern’s Device Authority convertible notes to equity, Tern will hold around 36% of Device Authority’s equity, equating to around $7.7 million.
Tern Chair Ian Ritchie said: ‘We are pleased with the progress Device Authority is continuing to make and with a substantial investment from astute investors we, and the other shareholders in the business, believe that Device Authority’s progress will be accelerated, particularly in the US.’
‘The board of Tern are constantly assessing all of our portfolio companies for the value that can be achieved from an immediate exit versus that potentially achievable with further growth capital. We do not believe that now is the right time for Tern to sell its interest in Device Authority given the current valuation landscape and with the further progress that Device Authority can make with this investment’, he continued.
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