ERD - ERoad. (Transport sector technology)

[thebusinessman]

If she gets to .50 I'm buying more!

[BlackPeter]

If she gets to .50 I'm buying more!

Just curious - while I can understand people buying deep value, where exactly do you see it here?

Is it the accumulation of losses? Is it the ineptitude to get the US market profitable? Is it the aging technology anybody else can build as well? Is it the second class fleet management solution?

Surely - its not because some people once have been prepared to pay more for this share? I guess its one of these companies which promised growth for more than a decade without ever delivering. Does this make them attractive to you?

Is it their consistency to disappoint shareholders?

[thebusinessman]

Just quickly, and I'm happy to elaborate more later, I have worked in tech for a while and there are plenty of sub-optimal tech solutions that do well because they are "sticky" ie. once installed, they stay. I think ERD have a good NZ business and I'm willing to forgive their destruction of capital in the US markets mostly because I didn't invest back then at those prices and I feel the opportunity there for them is still reasonable. I feel that overall they have good chance at share price recovery over the next few years, certainly not back into the 4's and 5's, but I don't need that level for this to be a good punt.

[BlackPeter]

Just quickly, and I'm happy to elaborate more later, I have worked in tech for a while and there are plenty of sub-optimal tech solutions that do well because they are "sticky" ie. once installed, they stay. I think ERD have a good NZ business and I'm willing to forgive their destruction of capital in the US markets mostly because I didn't invest back then at those prices and I feel the opportunity there for them is still reasonable. I feel that overall they have good chance at share price recovery over the next few years, certainly not back into the 4's and 5's, but I don't need that level for this to be a good punt.

Fair enough. I agree, that they have a good chance to be sticky in NZ (and probably Australia as well). Haven't really done the numbers to check how much his stickiness might be worth, but yes, if they stop their US bleeding and just help Kiwis and Ossies to pay their RUC, they must have some value.

Having said that - there still is an IF in above statement. Tough for any company to give up their dreams, stop filling a bottomless hole and just focus on making money.

[thebusinessman]

I agree. I'm going to crunch some new numbers soon so will share my further thoughts.

[Rawz]

Results out tomorrow and the cats out of the bag

[Bikeguy]

What are the predictions for tomorrow? Anyone prepared to share?
My belief is a 3-5 million loss…

[Rawz]

What are the predictions for tomorrow? Anyone prepared to share?
My belief is a 3-5 million loss…

yes agree with that. maybe an asset sale or patnership in north America or capital injection or something thrown in there too...

[ronaldson]

The likely result has been well signaled via the guidance update announcement on 27 February and the Investor Day presentation on 21 March, both of which were very close to y/e FY23 so almost certain to be accurate.

The nuance tomorrow will be seen in progress over the recent months, and how it is anticipated to be going forward. The Cortex acquisition doesn't seem to have been transformative yet in North America, but Australia and NZ are solid. Some buy interest today suggests folk are positioning expectations following recent lows which seem to have as much resulted from lack of liquidity after falling out of the NZX50 index as from adverse news.

It is clear patience is required if a turn around story is to play out here.

[winner69]

Results out tomorrow and the cats out of the bag

Might do a GTK and go up 50% in quick time

[Rawz]

Might do a GTK and go up 50% in quick time

Its trading less than half revenue multiple so wouldnt surprise me... just need a bit of light at the end of the tunnel in the form of a solid outlook for FY24 and beyond

[Rawz]

Nothing really new in here. SP is trading cheap compared to revenue. Close to cashflow break even. Clear improvement from H1 to H2. $10m cost savings FY23 and looking for another $10m FY24.

Not much of a forecast with revenue guidance to only increase high single digits... maybe just leaving some room for upgrades if they get some big fleet wins in NA market.

https://www.nzx.com/announcements/411938

Financial Highlights
• Normalised revenue of $165.3m was above guidance ($159m to $164m). Reported Revenue increased from $114.9m in FY22 to $174.9m for FY23 ( 52% increase). This reflects a full 12-month contribution from Coretex and is normalised for a one-off acquisition accounting adjustment of $9.6m relating to the Coretex merger. Growth in revenue was delivered across all markets.
• EBIT improved from a loss of $7.2m in FY22 to a profit of $1.7m, reflecting the recognition of one-off acquisition revenue and integration costs. Normalised for those one-off items, EBIT is a loss of $4.5m at the midpoint of the company’s guidance (loss between $3m and $6m).
• Annualised Monthly Recurring Revenue increased by $19.1m (14.2%). From $134.6m in FY22 to $153.7m in FY23, reflecting growth across all markets and a FX benefit of $8.6m.
• Free Cash Flow improved from an outflow of $45.1m in FY22 to an outflow of $29.9m in FY23. This included a clear improvement throughout the year, with the 1H23 FCF outflow of $21.7m effectively halving to $8.2m in 2H23. Available liquidity (debt facility headroom + cash) was $27.5m at the end of March 2023.

[bull....]

i thought it was a terrible report ... revenue increase for next yr is dismal for a tech stock and there still burning a large amount of cash probably run out before there cash flow positive :scared:

[Rawz]

i thought it was a terrible report ... revenue increase for next yr is dismal for a tech stock and there still burning a large amount of cash probably run out before there cash flow positive :scared:

they stop the cash burn this year and then go positive next FY.

Agree with the revenue increase outlook.. pathetic!! Unless there is a bit of sandbagging in it..

[ronaldson]

I thought the underlying problem is the cost of equipment replacement due to the closure of 3G and move to 4G in lieu and the capital spend involved as a consequence, which will drag on the result for FY24 and FY25?

This is a 2yr turn around story if the strategy can be achieved. So holders need to be patient.

[Rawz]

open up 10%

bugger all sellers until basically $1...

market likes the forecast around cashflow i reckon.. or maybe just so cheap on a revenue multiple vs the likes of TSK or SKO etc that its moving back towards 1x revenue multiple...?

[ronaldson]

Yes, a rerate underway.

[Rawz]

the selling from leaving the nzx50 pushed this too low.... 52cents was crazy. all weak hands are out maybe and this heading back to a 1x revenue multiple which means $1.46 per share.....

see what happens over the coming months. just needs a few good contract win announcements like what TSK did. And a couple of guidance improvements which lets be honest wont be hard given they have only said FY24 will increase high single digits. wont be hard to 'upgrade' that

[BlackPeter]

open up 10%

bugger all sellers until basically $1...

market likes the forecast around cashflow i reckon.. or maybe just so cheap on a revenue multiple vs the likes of TSK or SKO etc that its moving back towards 1x revenue multiple...?

Hmm - valuing a long established loss generator at x times revenue is a bit funny way to do it.

Anybody can generate high revenues if they don't need to worry about making money.

Remember - while Eroad's earnings make it look like a start up, it is a long established company with ageing technology and lots of experience in disappointing their shareholders.

Lost count of how many turnarounds they already had in the last decade or so. Might make the observers dizzy, but so far they didn't reduce the suffering of the shareholders.

[Rawz]

Yes BP all valid.

I dont really like using the revenue multiple trick and ive said it before on the IKE thread. It does as it does

[Rawz]

Might do a GTK and go up 50% in quick time

Your prediction looking correct so far... up 17% with bugger all sellers

[Rawz]

Wonder if the Goldman sachs review for a partner in the US will lead to a takeover of ERD given its trading for cents on the dollar?

[ronaldson]

ERD at market close today 69c, and one of top 5 gainers! Another share where the market response to the results announcement has taken a little time!

I don't think we will see the low 50's again.

[ronaldson]

And two days on again we are at 74c with almost no sellers until 80c. This share has regained momentum. I wouldn't be surprised with a return to the 90c it traded upon exiting the NZX 50 index in the reasonably near future. Already despite a disappointing initial entry decision I am closing on break even after topping up at 60c.

If they can get America right in the next two years this is a solid business. It is rare for a NZ based enterprise to be positioned for growth in NZ, Australia and USA.

[Rawz]

I agree Ronaldson.

Could head back to $1+ per share based on price to revenue multiples of other loss making entities.

Can’t help but think ERD is riding a tech growth wave thanks to the likes of TSK SPY and SKO locally and Nvidia, Meta etc internationally.

Anyway enjoying the gains and in the green after 4x my position at 58cents

[thebusinessman]

Joining the "back in the green" club after my 60c "DCA"

[Rawz]

Up heaps today. Im back on the steaks

[ronaldson]

Agree. In the green now. What if anything is driving this rerate?

[Rawz]

Agree. In the green now. What if anything is driving this rerate?

The big tech rally going on i reckon.
Bring ERD back to 1x price to sales

Or maybe the Goldman Sachs boys looking for a partner in the USA for ERD has instead found a BUYER for ERD.

[Rawz]

SP still going up up up

Must be a takeover coming or something???

[Rawz]

Might do a GTK and go up 50% in quick time

W69 called it. SP up 56% since announcement, what a legend :eek2:

[X-men]

I have been Tut Tut around the recent result.

Gosh...what am I missing here? Revenue same like VGL ..n market values ERD at 90m n VGL at 380m...

GTK revenue half of Eroad... market values GTK at 400 plus million and let alone SKO...

Market is really a beast!!!

[X-men]

Anyone....plz help me to understand the market???

[thebusinessman]

Anyone....plz help me to understand the market???

Sometimes it just resembles a small, panicked animal.

[X-men]

U see nzx surveillance officer...when SP goes up ... they questioned it...when SP down....no one cares!!

But I just don't get it...is Eroad the cheapest stock in NZX?

[sb9]

I have been Tut Tut around the recent result.

Gosh...what am I missing here? Revenue same like VGL ..n market values ERD at 90m n VGL at 380m...

GTK revenue half of Eroad... market values GTK at 400 plus million and let alone SKO...

Market is really a beast!!!

Key difference is in outlooks for each of them and industries they operate in, there lies in answer to your question about market valuation.

[X-men]

Maybe what worry the market is the EV... however recently Mark said the changing to EV is a positive for ERD.

Government loses fuel tax, somehow they needs to collect taxes ...road charges will be the main tax in the future for EV

[X-men]

Wow takeover at $1.30????

[haewai]

No. Six months of 'if'.

[ronaldson]

O my. 4,030,653 shares acquired on-market since 30 May at an average of 71.87c and then 15,994,438 at $1.30 on 21 June including an escalation agreement.

Takeover offer highly likely to be forthcoming in the near future. Recognition at last that this share has been woefully undervalued since removal from the NZX 50 not that long ago.

Happy holder as disclosed earlier on this thread.

[X-men]

Been in my watch list....managed to get small holding...been reading all the announcement last week... really puzzle me why ERD SP is so low ... considering the company made around $175m

[Rawz]

Wonder if the Goldman sachs review for a partner in the US will lead to a takeover of ERD given its trading for cents on the dollar?

Post this end of may...... what a legend lol jks :cool:

https://www.nzx.com/announcements/413472

Between 30 May 2023 and 16 June 2023 Brillian acquired 4,030,653 EROAD shares on market on the NZX and ASX for an aggregate consideration of NZ$2,897,081.37. In addition, on 21 June 2023 Brillian acquired a further 15,994,438 EROAD shares on market for an aggregate consideration of NZ$20,792,769.40 (with settlement to occur on 26 June 2023).


this equates to $1.30 per share as mentioned above

[haewai]

really puzzle me why ERD SP is so low

Because it's loss making and not growing

[winner69]

Exciting day for you rawz et al …..rawz did mention $1.46 in one of his posts …and that was on current revenues

[X-men]

No growth ...? Next revenue around $180m forecast

[haewai]

No growth ...? Next revenue around $180m forecast

That 5-8% revenue growth is comparable to the rate of inflation.

[Rawz]

That 5-8% revenue growth is comparable to the rate of inflation.

one mans garbage is another man's treasure... when a company trades at half its revenue its a tasty acquisition for some big random chinese company.... and when Goldman sachs was tapped it greatly boosted the chances of a takeover. As you have a cheap company and someone look for a fat fee.

disc. im highly likely going to sell the lot today and redeploy the funds to another super cheap stock

[blackcap]

I had a look at this company and thought they were a good price at 80 cents. Never bought any though. However, what was this company ever doing at $6.60 not that long ago?

[percy]

Well done holders..

[BlackPeter]

deleted ...

[Rawz]

Sad to see another great NZ tech company taking their product to the world stage get taken over... sigh

[whatsup]

Sad to see another great NZ tech company taking their product to the world stage get taken over... sigh

Is that what the ann says ?

[Rawz]

Is that what the ann says ?

no, im jumping to conclusions. just having a guess of what the future holds.

But still sad aye?

[winner69]

...........

[ronaldson]

Trading halt now until Monday. I was quick off the mark with further buy orders this morning to mop up low hanging fruit after the SPH announcement but (perhaps unsurprisingly) they won't fly now.

Will be an interesting announcement on Monday.

Given this is one of my competition picks for 2023 I am guessing that when peeter next updates I will surely have moved from the red % band to usefully in the green band! A lot can happen in 12 months!

[BlackPeter]

My apologies for that post. It was pretty dumb of me.

I had 2nd thoughts and had deleted before you responded but you must have been quick off the mark.

Sorry again ..I seek your forgiveness

All good. Don't we all have sometimes these times?

Apology accepted.

I removed my first response (which still contained your original post).

[X-men]

Wow...non bidding offer...$1.30? Or higher?

[X-men]

Donaldson...did u manage to grab some low hanging fruits??

[X-men]

$1.3 is too low...not even represent 1x revenue. At least $3?

[Muse]

Post this end of may...... what a legend lol jks :cool:

https://www.nzx.com/announcements/413472

Between 30 May 2023 and 16 June 2023 Brillian acquired 4,030,653 EROAD shares on market on the NZX and ASX for an aggregate consideration of NZ$2,897,081.37. In addition, on 21 June 2023 Brillian acquired a further 15,994,438 EROAD shares on market for an aggregate consideration of NZ$20,792,769.40 (with settlement to occur on 26 June 2023).


this equates to $1.30 per share as mentioned above

Legend status confirmed - nice work RAWZ!!!

(edit - rawz was already a legend in my book)

[Jaa]

1.30 is way too low, a quality SaaS company like this should trade on 5x revenue. NZ institutions being fools again.

Plenty of upside from here.

[winner69]

Wonder if the depth get cleared before trading restarted

Seems odd punters were selling at basically yesterdays close and it took a while for price to get 110/120

ASX opened at 113 ..they were on the ball

I’d say a few unhappy selling so cheap first thing this morning ….but heck well done if any of you guys got in and collected the giveaways.

[winner69]

1.30 is way too low, a quality SaaS company like this should trade on 5x revenue. NZ institutions being fools again.

Plenty of upside from here.

Yep cheap

5 times revenue is about 8 bucks

[Jaa]

As I shared back in March there is a reference transaction for Eroad I expect GS to use to determine fair value. These companies are in demand.


As a growing SAAS business, Eroad had its appeal and like other SAAS businesses was valued on a multiple of sales revenue. Much of the share price decline is in line with other SAAS businesses in NZ, Australia and the US. Minus 70% is pretty common for SAAS companies this year. Clearly they were in a bubble.

The merger with Coretex makes a lot of sense and should barring integration issues create a much stronger, robust company with larger R&D capacity. The more services they can offer the greater the lock-in and network effects they can create. Allowing for increased ARPU.

No idea why Auckland nurtured 2 large telematic companies focused on the US? There is now Whip Around too.

As for Eroad's core product, Ehubo, it is still ranked #1 in the US. Check out the user reviews (https://elddevices.net/best-eld-devices/).

Then there is the great RUC hope, that the shift to electric vehicles (https://www.washingtonpost.com/transportation/interactive/2021/electric-mileage-tax/) forces the US federal govt or at least more states to shift fuel tax from per gallon pricing to pricing per mile or RUC. That would be a bonanza for Eroad.



There is even a good reference transaction for guidance on Eroad's value. The very similar, fleet management and tracking company Azuga with 6,000 fleet customers in North America was acquired by Bridgestone in Aug 2021 (https://www.bridgestoneamericas.com/en/press-release-details.en.2021.bridgestone-acquires-azuga) for $US391m or about $NZ624m. More than 7x the current market cap of Eroad.

Are we once again failing to back a NZ business success story for long enough?

[Rawz]

Well I sold. Sold em at $1.25 and happy with that. Coulda woulda shoulda held on for more... happy to take the money and have done well enough to leave smiling and sleep well tonight. That's what its all about

[BlackPeter]

Well I sold. Sold em at $1.25 and happy with that. Coulda woulda shoulda held on for more... happy to take the money and have done well enough to leave smiling and sleep well tonight. That's what its all about

Somewhat sad result for a company which listed 9 years ago for something around $3.50, and never paid dividends, but good on you. Clearly - there can be money in trading if one times it right ... no matter how lousy the investment proposition.

[percy]

Well I sold. Sold em at $1.25 and happy with that. Coulda woulda shoulda held on for more... happy to take the money and have done well enough to leave smiling and sleep well tonight. That's what its all about

Well done.

[X-men]

https://www.nzherald.co.nz/business/eroad-says-its-a-takeover-target/WM2UI2MFPJGX3HKXMJS42NNIHQ/

[silverblizzard888]

Extremely cheap offer for the acquisition of a world class tech firm, but thats the cut-throat factor of the stock market the minute you fall behind on growth, margins or profits you sink to the bottom of the valuation ladder and the beauty of it is that the minute you turn these factors around its worth a million times more and thats where the real money is made. Currently its a good time to shop for undervalued companies to hold till when interest rates drop and the economics wheel of progress starts spinning again.

Congratulations for the ones who saw ERD trading at a extremely low multiple and took action, you made some extremely good returns buying at the bottom. I feel like the offer will be rejected merely because its too cheap, maybe a revised offer of $1.60 might get it over the line, still pretty cheap mind you for what the companies achieved and would be worth in the future.

[ronaldson]

Donaldson...did u manage to grab some low hanging fruits??

I bid to take out the depth up to 87 as soon as I read the SPH announcement (and stood ready to edit my bids as necessary pre open) but then the trading halt until Monday or earlier announcement was requested by ERD. For some reason Jarden had kept my orders off-market until then although they were limit orders. I didn't really expect that halt to be lifted today and as I was fully committed/unavailable after about 11.00am I thought it prudent to cancel my orders around then. Unfortunately, it seems the halt was lifted just after midday and some comments on this forum indicate there may have been some initial trading at or under that price at that point? If so, an unfortunate outcome for me. But a happy holder otherwise. And much better placed in peeters 2023 competition now!

[ronaldson]

Extremely cheap offer for the acquisition of a world class tech firm, but thats the cut-throat factor of the stock market the minute you fall behind on growth, margins or profits you sink to the bottom of the valuation ladder and the beauty of it is that the minute you turn these factors around its worth a million times more and thats where the real money is made. Currently its a good time to shop for undervalued companies to hold till when interest rates drop and the economics wheel of progress starts spinning again.

Congratulations for the ones who saw ERD trading at a extremely low multiple and took action, you made some extremely good returns buying at the bottom. I feel like the offer will be rejected merely because its too cheap, maybe a revised offer of $1.60 might get it over the line, still pretty cheap mind you for what the companies achieved and would be worth in the future.

And I agree with the above. Perhaps this non-binding indicative offer will elicit some further suitor? But it seems like over 17% is already locked up!

I note ERD paid $150m for Cortex not that long ago and this offer barely values the entire enterprise at that. A steal on that basis!

[X-men]

It said...if any offer come up higher..that 17% of share acquired will be matched the new offer price.

Perhaps those 17% holders have agreed to let them have the share knowing the next offer price will be higher?

[X-men]

Volaris has also disclosed that it has acquired an interest of 17.734% of
EROAD's shares on issue with the most recent acquisition of 15,994,438 shares
being at $1.30 per share with an agreed escalation payment to the sellers of
these shares if within six months after the date on which the relevant
escalation agreement was entered into, Volaris enters into a scheme of
arrangement with EROAD at a higher price, or gives notice under rule 41 of
the Takeovers Code of its intention to make a full takeover offer at a higher
price.

So..the sellers knew the offer price will be higher than $1.30

Nothing to lose for these seller....$1.30 will the based offer ...extra will be an icing on the cake

[ronaldson]

Volaris has also disclosed that it has acquired an interest of 17.734% of
EROAD's shares on issue with the most recent acquisition of 15,994,438 shares
being at $1.30 per share with an agreed escalation payment to the sellers of
these shares if within six months after the date on which the relevant
escalation agreement was entered into, Volaris enters into a scheme of
arrangement with EROAD at a higher price, or gives notice under rule 41 of
the Takeovers Code of its intention to make a full takeover offer at a higher
price.

So..the sellers knew the offer price will be higher than $1.30

Nothing to lose for these seller....$1.30 will the based offer ...extra will be an icing on the cake


The sellers don't actually know the price will ultimately be higher. An escalation clause is just a legally prudent contractual agreement in return for committing to the current price ($1.30 cash settling on 26 June) in circumstances where the final outcome could be more, as is not uncommon in these situations. A bit like the provisions included in the early Treaty Settlements made when the Government's $1b fiscal envelope was said to apply. Otherwise why would you not wait and see rather than do it now? Both parties benefit from this arrangement. The buyer needs certainty of control now and the seller gets cash in the hand without the potential for future disadvantage by comparison with other holders.

[winner69]

Volaris has also disclosed that it has acquired an interest of 17.734% of
EROAD's shares on issue with the most recent acquisition of 15,994,438 shares
being at $1.30 per share with an agreed escalation payment to the sellers of
these shares if within six months after the date on which the relevant
escalation agreement was entered into, Volaris enters into a scheme of
arrangement with EROAD at a higher price, or gives notice under rule 41 of
the Takeovers Code of its intention to make a full takeover offer at a higher
price.

So..the sellers knew the offer price will be higher than $1.30

Nothing to lose for these seller....$1.30 will the based offer ...extra will be an icing on the cake

So the sellers are taking a punt no other party (other than Volaris) will front up with more $1.30 and take over ERoad

At least they got their cash now ….deal or no deal

[BlackPeter]

Extremely cheap offer for the acquisition of a world class tech firm, but thats the cut-throat factor of the stock market the minute you fall behind on growth, margins or profits you sink to the bottom of the valuation ladder and the beauty of it is that the minute you turn these factors around its worth a million times more and thats where the real money is made. Currently its a good time to shop for undervalued companies to hold till when interest rates drop and the economics wheel of progress starts spinning again.

Congratulations for the ones who saw ERD trading at a extremely low multiple and took action, you made some extremely good returns buying at the bottom. I feel like the offer will be rejected merely because its too cheap, maybe a revised offer of $1.60 might get it over the line, still pretty cheap mind you for what the companies achieved and would be worth in the future.

The old saying "Never praise the day before nightfall" comes to mind ... but yes, obviously - anybody who bought below 80 cents and sold already yesterday clearly made a profit. Congratulations! Obviously - unless they had insider knowledge, it was sheer luck, but this is what traders need.

Anybody who bought this "world class destructor of share holder equity" at IPO or potentially worse at peak times can only lick their wounds.

Waiting for the takeover (which may or may not eventuate) carries the usual risks.

What makes you believe that they offer not just "world class technology", but that somebody will be able to profitable market this technology?

How do you measure that $1.30 is an "extremely cheap offer"?

[X-men]

world class destructor of share holder equity??

Look at PEB....SKO...not to mention TSK

[gbogo]

I’m the loser who bought a small parcel at 80c and sold it at 60c when my stop-loss was triggered. you lose some. but really, i’m sick of the illiquid NZ market where nothing happens for months and then news comes out and there’s a big jump. or fall.

although i’d like to see an investigation into what some of the recent aggressive buyers new - not holding my breath though.

[thebusinessman]

anybody who bought below 80 cents and sold already yesterday clearly made a profit. Congratulations! Obviously - unless they had insider knowledge, it was sheer luck

Plenty of people, myself included, had plenty of time to DYOR and concluded around 90c that the benefit of upside seemed to outweigh the risk of further downside. I wouldn't call it luck. It was lucky that it went even further south and some of us still had capital to double down!

[Rawz]

Plenty of people, myself included, had plenty of time to DYOR and concluded around 90c that the benefit of upside seemed to outweigh the risk of further downside. I wouldn't call it luck. It was lucky that it went even further south and some of us still had capital to double down!

Agree.. Key was right before FY23 results were announced there was a large price jump totally out of the blue. Then in the announcement they advised that Goldman Sachs was tapped and the SP carried on with the large daily increases. Enough signs there that something was brewing. But also yes.. a bit of luck involved ill admit to that lol. You make your own luck thou

[haewai]

I note ERD paid $150m for Cortex not that long ago and this offer barely values the entire enterprise at that. A steal on that basis!

Lol, might be worth thinking about who paid for that aquisition, and how much. Here's a clue: https://www.eroadglobal.com/global/news-entry?title=EROAD%20to%20acquire%20Coretex%20to%20 accelerate%20key%20growth%20strategies&cat=Investors

[ronaldson]

Lol, might be worth thinking about who paid for that aquisition, and how much. Here's a clue: https://www.eroadglobal.com/global/news-entry?title=EROAD%20to%20acquire%20Coretex%20to%20 accelerate%20key%20growth%20strategies&cat=Investors

Correct haewai. The number of shares on issue is 112.628m which multiplied by $1.30 is about $146.5m being the value proposed in the non-binding offer. The acquisition of Coretex alone in 2021 was $150m plus the performance earnout which was ultimately settled for around 60% of the agreed sum. The saving grace, which has kept ERD afloat since, was that $96m of the consideration plus a similar proportion of the earnout was settled by issue of additional share capital at $6 per share. The vendors of Coretex will have literally been wincing when the share price retreated recently to around 60c or just 10% of that issue price. And even at $1.30 now suggested those holders who haven't exited subsequently have horrendous notional losses.

So I expect the ERD Board to be very proactive in seeking some enhancement. And I note one of the preconditions to be satisfied for the offer to proceed is unanimous support of the Directors.

Will be interesting how this plays out.

[silverblizzard888]

The old saying "Never praise the day before nightfall" comes to mind ... but yes, obviously - anybody who bought below 80 cents and sold already yesterday clearly made a profit. Congratulations! Obviously - unless they had insider knowledge, it was sheer luck, but this is what traders need.

Anybody who bought this "world class destructor of share holder equity" at IPO or potentially worse at peak times can only lick their wounds.

Waiting for the takeover (which may or may not eventuate) carries the usual risks.

What makes you believe that they offer not just "world class technology", but that somebody will be able to profitable market this technology?

How do you measure that $1.30 is an "extremely cheap offer"?
Well if we're valuing them since their IPO or their peak then yes they have been a massive destruction in shareholder value. The past was a company that was put under pressure to grow faster (they mentioned it when they first listed) and thats basically been their undoing by committing to many resources and building a massive cost structure and signing low margin contracts in order to pursue growth, which their growth did help fuel a high valuation 2 years ago when their share price traded well above $6.

Now they realize in this climate that they need to build towards being cashflow positive and have slowed growth completely in order to lower expenses to the size that matches their revenue and stabilize the business, which would usually be alright, but the problem is being a public company you don't get the luxury to slow down or your share price takes a massive hit.

With their current technology they have signed up some of the world's largest players with a high retention rate, so technology is not their problem. Can they be profitable?

Yes they could be a profitable business quite easily if they sacrificed growth. 23% of their revenue in the last financial year was spent on research and development thats lowered from 28% a year prior. Next financial year they will be cutting to 17%. Also nearly 25% of their recent financials were non-cash expenses. Given their loss in recent financials was $3m on $174.9m revenues, you could say they have a lot of working room if they slow down in growth, which they are doing so in their present financial year.

They have ebitda of $45.2m, the average saas company with margins around 30% on public markets trades at 6.7 times their multiple for enterprise value. ERD would be $302million – debt $83m = $219m, which is $1.94 per share. $1.30 would be cheap in comparison.

[BlackPeter]

Well if we're valuing them since their IPO or their peak then yes they have been a massive destruction in shareholder value. The past was a company that was put under pressure to grow faster (they mentioned it when they first listed) and thats basically been their undoing by committing to many resources and building a massive cost structure and signing low margin contracts in order to pursue growth, which their growth did help fuel a high valuation 2 years ago when their share price traded well above $6.

Now they realize in this climate that they need to build towards being cashflow positive and have slowed growth completely in order to lower expenses to the size that matches their revenue and stabilize the business, which would usually be alright, but the problem is being a public company you don't get the luxury to slow down or your share price takes a massive hit.

With their current technology they have signed up some of the world's largest players with a high retention rate, so technology is not their problem. Can they be profitable?

Yes they could be a profitable business quite easily if they sacrificed growth. 23% of their revenue in the last financial year was spent on research and development thats lowered from 28% a year prior. Next financial year they will be cutting to 17%. Also nearly 25% of their recent financials were non-cash expenses. Given their loss in recent financials was $3m on $174.9m revenues, you could say they have a lot of working room if they slow down in growth, which they are doing so in their present financial year.

They have ebitda of $45.2m, the average saas company with margins around 30% on public markets trades at 6.7 times their multiple for enterprise value. ERD would be $302million – debt $83m = $219m, which is $1.94 per share. $1.30 would be cheap in comparison.

Fine. Interesting to note that since inception of this company (and many others) investors made similar calculations which (in the case of ERD) always turned out to be wrong. The problem is, while numbers don't lie ... the assumptions you have to make to calculate future value are always random and rarely right.

So - given ERD's amazingly consistent capabilities to destroy shareholder value, no matter how often you multiply their EBITDA with a random number - what do you think is different this time?

Don't forget - neither EBITDA nor your random number mean anything. The only thing which does matter is future NPAT.

[winner69]

BusinessDesk -

Toronto-listed Constellation Software’s bid for ERoad is a “knock-out offer” that is likely to succeed, Australian broking house Bell Potter reckons.

In a note to clients this morning, analyst Chris Savage said that, at $1.30 a share, the takeover bid is “opportunistic” but gets the “knock-out” rating because it came in at a 69% premium to the 64 cents closing price that applied before the bid was lodged on Thursday.


“We do think the offer is opportunistic given the depressed share price and the relatively low multiples the stock was trading on (e.g. FY24 EV/EBITDA around 3x at previous close) but the c.18% stake secured will likely deter another party from making a counter offer,” Savage said.

[blackcap]

BusinessDesk -

Toronto-listed Constellation Software’s bid for ERoad is a “knock-out offer” that is likely to succeed, Australian broking house Bell Potter reckons.

In a note to clients this morning, analyst Chris Savage said that, at $1.30 a share, the takeover bid is “opportunistic” but gets the “knock-out” rating because it came in at a 69% premium to the 64 cents closing price that applied before the bid was lodged on Thursday.


“We do think the offer is opportunistic given the depressed share price and the relatively low multiples the stock was trading on (e.g. FY24 EV/EBITDA around 3x at previous close) but the c.18% stake secured will likely deter another party from making a counter offer,” Savage said.


Interesting. So its AUD$1.30 and not NZD $1.30 that is being offered. Missed that part.

[winner69]

Clare Capital track revenue multiples

March chart below

Cloud companies with relatively low gross margins (like ERD) generally in bottom quartile

Posted for info ….saying ERD worth 5 or more times revenues is a bit wishful thinking

[winner69]

Interesting. So it’s AUD$1.30 and not NZD $1.30 that is being offered. Missed that part.

Pretty sure NZ$1.30 …is a NZ company after all

[Snow Leopard]

Interesting. So its AUD$1.30 and not NZD $1.30 that is being offered. Missed that part.

Definitely NZ$1.30

[Jaa]

Clare Capital track revenue multiples

March chart below

Cloud companies with relatively low gross margins (like ERD) generally in bottom quartile

Posted for info ….saying ERD worth 5 or more times revenues is a bit wishful thinking

Interesting, thanks Winner. That insight is dated 31 March 2023 (https://uploads-ssl.webflow.com/63438c7fda79c9cd22c86dc8/643cce97fc0508beafc3db15_Clare%20Capital%20Tech%20 Insights%20283%20-%20Cloud%20Index%20as%20at%2031%20March%202023%20-%2020230417.pdf), SaaS companies have had a good recovery since then off a low bottom.

Regardless ERD valuation shouldn't be 5x for a couple of reasons, relatively capital intensive as they own many of the units which take a few years to pay off and slower rate of recent growth. On the plus side they have a high retention rate and a diversified customer list so not as risky either.

Taking the bottom quartile multiple of 3.4x for US companies is probably fair as that is where ERD's future growth is coming from. This multiplier would be higher at today's valuations anyway. Revenue forecast is ~$162m x 3.4x = $550m or $4.87 a share. Even using the bottom quartile for ANZ companies of 1.1x gives a valuation of $178m or $1.58 a share.

IMO opinion Eroad is a better business than Azuga which got bought out for $NZ624m as Eroad have more customers and revenue. Knock a bit off for 2021 exuberance and a takeover price of $4-$5 seems about right.

[blackcap]

Pretty sure NZ$1.30 …is a NZ company after all

Yeah I thought so too, but the analysts report reads a bit funny where they say: "at $1.30 a share, the takeover bid is “opportunistic” but gets the “knock-out” rating because it came in at a 69% premium to the 64 cents closing price that applied before the bid was lodged on Thursday".

The red herring is referring to the 64 cents closing price.

[Gerald]

Would anyone more intelligent be able to answer when/how much that volume between $.80 and $1.07 went through? It looks like the halt went on at 9:35 so it would have had to been after it was lifted at midday?

[ronaldson]

I don't know that can be answered retrospectively now, at least from the Jarden website. It could be ascertained contemporaneously, and possibly later that day, but the database is lost to users when it rolls over to the next trading day?

[ronaldson]

Oliver Mander (NZSA) comments on a couple of issues in todays email issue of the Association's "The Briefing and Scrip Magazine" - an insight and views with respect to ERoad and the loss of other NZ software companies in the last couple of years, and a commentary on the potential unintended consequences of the PM's suggestion that MP's should be prohibited from listed equity holdings as a remedy for the Michael Wood circumstance.

[Rawz]

Would anyone more intelligent be able to answer when/how much that volume between $.80 and $1.07 went through? It looks like the halt went on at 9:35 so it would have had to been after it was lifted at midday?

I remember looking and it was like $80k worth

[winner69]

Oliver Mander (NZSA) comments on a couple of issues in todays email issue of the Association's "The Briefing and Scrip Magazine" - an insight and views with respect to ERoad and the loss of other NZ software companies in the last couple of years, and a commentary on the potential unintended consequences of the PM's suggestion that MP's should be prohibited from listed equity holdings as a remedy for the Michael Wood circumstance.

Interesting ……was it a good read? Did it enlighten you any further?

[winner69]

Oliver reported by RNZ

A repeat of the recent Pushpay saga could be possible as transport software company Eroad evaluates a takeover offer, the Shareholders' Association says.

Eroad is subject to a $147 million offer from Canadian software group, Constellation, which has built a near 18 percent stake in the company.

Constellation, through its subsidiary Volaris, has offered $1.30 a share, a 69 percent premium to the pre-offer price.

Eroad shares traded as high as $2.35 a share in the past year and the share price was above $6.00 in 2021.

Shareholders' Association chief executive Oliver Mander, who also owned a small stake in Eroad, said a repeat of the initial negative reaction to the bid for mobile donations company Pushpay was possible with Eroad.

Mander stressed it was still early days but said some shareholders may be unhappy with the offer.

"This is a non-binding, indicative offer. That means that the bidder itself is looking to do further due diligence," he said.

"I've got no doubt that the company will be looking to apply appropriate governance processes to ensure that there is fair value received by any shareholders.

Mander said it was at a "really early stage" but some of the reaction the association had heard was that the offer to buy Eroad did not fully value the company's opportunities.

Eroad declined an interview request with RNZ to discuss the takeover offer.

The offer for Eroad came as other New Zealand tech firms attracted overseas interest, such as the recent takeover of Pushpay which ended up going ahead after a revised offer.

Mander said it showed that New Zealand had the capability to develop technology that was of interest to the wider world.

But he said the concern was that the "next generation" of tech companies was not coming through to the listed market.

"There's plenty of capital in New Zealand business, there's plenty of people who are willing to invest in the types of companies that can improve New Zealand's productivity," Mander said.

https://www.rnz.co.nz/news/national/492496/early-days-in-possible-eroad-takeover-but-some-shareholders-not-happy

[ronaldson]

I don't have the skills to post a link, but if any member of this forum wishes to contact me at ronaldsontrust@hotmail.com I will forward the NZSA email.

[X-men]

We should see the payment of 17% settles tmw..on 26th June....

Hopefully an increase offer will come soon

[ronaldson]

Another SPH Notice filed today by Australian Ethical Investments Limited disclosing they have sold a total of 2,314,460 shares on 21 and 22 June for $1.2980c or 2.24% of the issued share capital. The buyer is highly likely to be Brillian because when they filed earlier and gave notice of the non-binding indicative offer they had 17.734% so by addition we get to (now) almost 19.98% being just under the threshold triggering a formal takeover.

So these guys are serious.

[bulltrap]

I remember looking and it was like $80k worth


As one of the unlucky folks who had a pre-existing sell order in there somewhere, I can say my trade settled before 12:17 (the time on my email from Jarden), and I only got paid my offer price - which was well below the big off-market trades that already went through, and below where the market settled shortly after.


I feel it was unfair that the trading halt was so short, depth wasn't cancelled, and the opening auction was skipped. I'm also surprised that there weren't enough buy offers to match my sell order at the moment the halt was lifted - which I believe would've split the difference in settlement price calculation.


My excuse for inattentiveness is that I was happily dozing in another time zone. By the time I woke up, it was all done and dusted.


Disc: Still holding the rest

[sunnysleeper11]

Cap raise 2 years ago was at $5.58 a share.
Pretty amazing if they accept the $1.30.

[ronaldson]

The on-market price is still at a discount to the non-binding indicative offer, which may tell a tale.

[Mel]

The on-market price is still at a discount to the non-binding indicative offer, which may tell a tale.
To my mind, it's a bit of an opportunistic bid

[BlackPeter]

To my mind, it's a bit of an opportunistic bid

As usual, it depends on a future nobody can predict.

For starters: Eroad always promised growth, but they have a solid track record of not delivering. This is a quite important hint for any potential investor.

After more than 10 years and several restarts which all fizzled out before they even reached cruising level and after mainly delivering losses it is hard to say what they really might be worth.

Looking at their earnings (eh - losses) - what's the worth of a quite reliable loss generator?

Looking at their "growth": quite lame for a start up, and this is just looking at revenue growth. Earnings growth is an indicator you better don't track with them, unless you like negative numbers.

Looking at their potential earnings after stopping the bleeding coming from paying for an US expansion only delivering losses: they probably do have some value based on their NZ / AU business, but I doubt it would be significantly more than the takeover offer.

Quite possibly they have some bits and pieces a competitor might be able to usefully integrate into their own system, but hard to value without in depth due diligence and without knowing what the competitor really might need. As well - given that potential suitors are not really queuing up, why should the only (potential and not yet fully committed) candidate offer to pay top dollars for taking a quite significant risk?

Sure - one can always hope for this spaceship to land on the square and green men emerging prepared to pay top dollars, but otherwise - this offer might be the "get out of jail card" for investors .. and who knows, it might be the last opportunity.

[ziptie]

Cap raise 2 years ago was at $5.58 a share.
Pretty amazing if they accept the $1.30.

It would be Disgusting if they do, however given what similarly transpired with PPH, I also wouldn't be surprised.

Disc: Holding, but erring on getting out.

[Rawz]

Can only value a company today. What people were willing to pay 2 years ago is not really relevant as we are heading into a global downturn, free money is gone, crazy SPs are no longer etc.

If the takeover fails SP will drop to 50 cents and they will likely need to tap shareholders for more capital based on the balance sheet and current cash burn. take your pick on what path you want to go down

[winner69]

Seems to be a need to supply a lot of tech hardware before a customer can start using the SaaS stuff ……a far bit of low margin stuff before the higher margin recurring stuff kicks in.

But with most of these companies I reckon they don’t charge enough ….ie never that profitable…..and problem with that is charging realistic amounts Mai’s the offer unattractive ,,,,do they have a sustainable business model to start with?

[X-men]

https://www.nzshareholders.co.nz/scrip-article/eroad-could-a-partial-takeover-offer-be-the-best-outcome-for-all/

Partially takeover recommended....the offer $1.30 only justify NZ business ...not Australia n US...

[thebusinessman]

So, what's interesting now is, at 90c I felt the upside potential outweighed the downside risk, now there is clearly more upside potential from a revised offer, but compared to it falling away again? Tricky. I could see a revision to $1.60 and maybe up to $2 should a bidding war arise. But the crystal ball needs a bit more polish.

[X-men]

Considering too many nz companies been taken over... They might try to retain this puppy.

Possible partial take over ...Eroad can benefit using the big resources, try to penetrate the US market.

Maybe a capital issue at higher price to Brillian...capital injection???

[ronaldson]

Market close today at $1.30 with buyer unsatisfied and no seller until $1.32. It seems a view is consolidating currently that this present situation has further to run. Those that purchased in the low/mid $1.20's subsequent to the announcement will be feeling vindicated.

As a holder that initially purchased in my trader capacity I believe there is minimal downside risk to continuing on the share register for now.

[Mel]

As usual, it depends on a future nobody can predict.

For starters: Eroad always promised growth, but they have a solid track record of not delivering. This is a quite important hint for any potential investor.

After more than 10 years and several restarts which all fizzled out before they even reached cruising level and after mainly delivering losses it is hard to say what they really might be worth.

Looking at their earnings (eh - losses) - what's the worth of a quite reliable loss generator?

Looking at their "growth": quite lame for a start up, and this is just looking at revenue growth. Earnings growth is an indicator you better don't track with them, unless you like negative numbers.

Looking at their potential earnings after stopping the bleeding coming from paying for an US expansion only delivering losses: they probably do have some value based on their NZ / AU business, but I doubt it would be significantly more than the takeover offer.

Quite possibly they have some bits and pieces a competitor might be able to usefully integrate into their own system, but hard to value without in depth due diligence and without knowing what the competitor really might need. As well - given that potential suitors are not really queuing up, why should the only (potential and not yet fully committed) candidate offer to pay top dollars for taking a quite significant risk?

Sure - one can always hope for this spaceship to land on the square and green men emerging prepared to pay top dollars, but otherwise - this offer might be the "get out of jail card" for investors .. and who knows, it might be the last opportunity.
Thanks for your commentary, as always, you make some good points. My perspective is tainted by having shares that I paid ~$1.60 for :(

[X-men]

They are not playing around...kept buying shares.. another $1.5 m shares after the initial announcement

[winner69]

And the new Chair Susan is a NO to opportunistic takeovers

That’s good

[X-men]

Another halt in trading!!

[winner69]

Another halt in trading!!

Going to tell them to bugger off and come back with a FAR better offer?

[JSwan]

Going to tell them to bugger off and come back with a FAR better offer?

Then they’ll just keep buying shares

[X-men]

Here we go...the board said no ... Brillian will keep buying off the market

[winner69]

Chair Susan to Fletchers to bugger when she was at STU. They came back but she gave them the short shift again.

So Susan pretty good at not giving things away cheap..

[ronaldson]

ERD onwards and upwards. Now $1.38. The announcement news is spreading!

[Bikeguy]

Why though? Unless another bidder appears this could all simply disappear in smoke? Am a holder but might sell and sit on the sidelines? Any thoughts guys?

[Rawz]

I reckon all but certain a higher offer comes out. Maybe $1.50-$1.80 range. Unless you have a better place for the funds i would hold. just my opinion (i sold at $1.25 straight after the first announcement)

[Bikeguy]

I reckon all but certain a higher offer comes out. Maybe $1.50-$1.80 range. Unless you have a better place for the funds i would hold. just my opinion (i sold at $1.25 straight after the first announcement)

My gut feel is you are right, and they have the provision to pay more for shares they got at $1.30 so they are almost signaling something still left in the pocket,
Just have felt the pain of offers not increasing in the past, makes one nervous

[Bikeguy]

Yes, I sold 1/3 of my holding at $1.23 straight after offer came out

[Rawz]

My gut feel is you are right, and they have the provision to pay more for shares they got at $1.30 so they are almost signaling something still left in the pocket,
Just have felt the pain of offers not increasing in the past, makes one nervous

Yes and that's why I sold, so I could sleep well at night. It would be hard pill to swallow to see the SP fall back to 50cents if everything fell through.

Plus I thought the money was better in 2CC and TSK so moved it there.

[winner69]

Based on what ERD have sort of said what they reckon their company is worth I’d say they would even have to reject an offer in range $1.80/$2.00

Think the bid wil get that high?

Whatever the value of ERD to an acquiror is anchored around $1.30 plus a bit more …in the Boards eyes I feel any decent bid from here will ‘materially’ undervalue the company.

Be interesting if no takeover if they can execute on their strategy to make ERD great with well rewarded shareholders

[X-men]

Partially takeover....Brillian has bought almost 18.5% of the total share

So no way they are going to walk away with the takeover

[Rawz]

If no takeover they need a cap raise based on cash burn and balance sheet

[ronaldson]

Brillian have 18.5% at an average (my guess) of 80cps or less. Very good money if they exit even now in the $1.30s having boosted the price themselves!

But I agree it's worth more and virtually impossible now for the price to fall significantly. The market lost faith in this share when it exited the NZX 50 index, but that was a mistaken view even though it's hard to establish the intrinsic value at this point.

Like some others above, I sold 50% at $1.30 to sleep soundly but happy to retain the rest for things to play out. And a good pick for my 2023 Sharetrader forum competition!

[X-men]

A new share can be issued to Brillian ....let say....10m shares at $2.5....ERD gets $25m cash to penetrate the growth in the USA

[BlackPeter]

Chair Susan to Fletchers to bugger when she was at STU. They came back but she gave them the short shift again.

So Susan pretty good at not giving things away cheap..

Well, yes - but a bit worried - didn't FBU make an amazing and never to be repeated offer, and she declined that?

[X-men]

Fbu did not buy any jack shares at all...just put an offer n walked away....the commerce commission definitely not going to approve the take over of STU due to competition

[carrom74]

Seldom these takeovers get accepted at the first place. I guess both the buyer and board know that. With so much bought over by volaris.(doubt they will go back on this),it's going to be an interesting few months before they come with a counter punch!

[Bikeguy]

Seldom these takeovers get accepted at the first place. I guess both the buyer and board know that. With so much bought over by volaris.(doubt they will go back on this),it's going to be an interesting few months before they come with a counter punch!

You’re right, it’s the purchases they have already made that make ( hopefully) this situation and their intention abit more substantial?
The only reason I can see for these purchases is they themselves are concerned at the possibility of another bidder? Why purchase prior to their offer ?

[ronaldson]

You’re right, it’s the purchases they have already made that make ( hopefully) this situation and their intention abit more substantial?
The only reason I can see for these purchases is they themselves are concerned at the possibility of another bidder? Why purchase prior to their offer ?

Obviously because you can acquire a potentially blocking stake in case another suiter emerges. But also because you can get them cheaper on-market at that point then after you have made your intentions known and you can hardly lose as I noted in my post #630 above. In this case it has been a great outcome for the acquirer as will be shown on their balance sheet at the next reporting date when their holding is marked to market!

[Bikeguy]

Obviously because you can acquire a potentially blocking stake in case another suiter emerges. But also because you can get them cheaper on-market at that point then after you have made your intentions known and you can hardly lose as I noted in my post #630 above. In this case it has been a great outcome for the acquirer as will be shown on their balance sheet at the next reporting date when their holding is marked to market!

I thought they paid $1.30 per share?

[ronaldson]

I thought they paid $1.30 per share?

I rechecked the SPH Notices and you are right to query my statement at #630 above.

Brillian acquired the first 4.03m shares on market between 30 May and 16 June at an average $0.718cps. Then a far greater number, 15.994m off market from the vendors who sought the escalation clause, at $1.30cps.

And later pursuant to a subsequent SPH a further 1.173m shares likely on-market at an average $1.286cps.

Interestingly the escalation provision mentioned in the original SPH apparently only applies to a full acquisition and not a partial takeover, so in that regard seems to perhaps incentivise the latter in lieu?

At market close yesterday the share price is $1.37 so a healthy gain for Brillian, just not to the extent I represented given the much smaller number purchased at $0.718cps.

[Bikeguy]

I rechecked the SPH Notices and you are right to query my statement at #630 above.

Brillian acquired the first 4.03m shares on market between 30 May and 16 June at an average $0.718cps. Then a far greater number, 15.994m off market from the vendors who sought the escalation clause, at $1.30cps.

And later pursuant to a subsequent SPH a further 1.173m shares likely on-market at an average $1.286cps.

Interestingly the escalation provision mentioned in the original SPH apparently only applies to a full acquisition and not a partial takeover, so in that regard seems to perhaps incentivise the latter in lieu?

At market close yesterday the share price is $1.37 so a healthy gain for Brillian, just not to the extent I represented given the much smaller number purchased at $0.718cps.

I appreciate the information above, it’s good stuff👊
I’m nervous however my gut feel is there is more in the tank and a revised offer will be forthcoming…
And whatever the outcome it was a very welcome entry, got into this company at $1.40 and $1.30 , and promptly watched $10k slide off the table…

[Bikeguy]

Lost my nerve on this one and just sold the rest at $1.38,

[X-men]

SP is holding up ...sign of Brillian keeps buying shares on the market

[Southern Lad]

The Australian Dataroom column suggests Volaris is poised to raise its bid foe ERoad.

https://www.theaustralian.com.au/business/dataroom

[winner69]

Getting Newman back as Director / Consultant at this time is an interesting move

Maybe ERD plan to be keep rejecting offers until one is so big they won’t be able to refuse

[ronaldson]

SP has continued to creep upwards to $1.44 and has touched $1.46 intra-day. I wonder when we will have an announcement clarifying "where to now" with the NBIO from Brillian?

When I look back to the nadir ERD reached earlier this year holders will be very happy presently.

[winner69]

Market Close report in media

Transport technology firm Eroad was unchanged at $1.44. It was reported that Volaris Group, owned by Toronto-listed Constellation Software, presently has no intention of increasing its takeover offer (at $1.30 a share), though it reserves the right to do so if there is a change of circumstances.

https://www.goodreturns.co.nz/article/976522020/f-p-healthcare-leads-nz-market-down-after-day-of-gains.html

[X-men]

Has a gut feeling ...they won't increase the bid. They will just keep the current holding n prefer to wait and see.

Steven is back. With 12% holding...the takeover won't be easy. After all...he walked away from the role n left all the mess the new CEO.

Took my profit last week n walked away with a handsome profit....less than 4 weeks holding.

Prefer to wait n see ...hope the sp not go down to $1.30

[Rawz]

The Volaris action hasn’t attracted any other suitors so why do they need to do anything?

Meanwhile it’s up to ERD itself to kick some goals to prop up the SP. Where are the announcements of some big North America customer wins..?

The other factor is ERD are forecasting cash flow neutral by FY25 and cash flow positive by FY26. Doing this means they will keep within their $90m debt facility. Any miss here and it’s cap raise time. So Volaris can sit and watch and any slip up will make it easier for them to get the rest of the company at the cheap price of $1.30

[X-men]

Yeah..that big debts that worry n hinder me

[X-men]

The firm, ultimately owned by Toronto-listed Constellation Software, said in response to speculation: “Volaris Group wishes to clarify that it currently has no intention to increase its proposal price under its NBIO, although it reserves its right to do so if there is a change of circumstances - including, but not limited to, being granted access to due diligence by Eroad”.

[Bikeguy]

This was my fear, that unless there was another company interested in purchasing that they would just sit tight and wait,
I am happier now with my decision to sell at $1.38 than I was yesterday

[ronaldson]

Yes, I quit finally at $1.42. Not the highest price that was available, but I tried to balance how it is.

Need to see what is said at the AGM on Friday.

Looking to shift funds to TRA which is dividend paying, and might be close to entering the NZX 50 index.

[whatsup]

Now this is a real conundrum , do punters sell out in order to free up their now " dead " money or wait another 18 months for another .10-.20 ?

[Rawz]

Now this is a real conundrum , do punters sell out in order to free up their now " dead " money or wait another 18 months for another .10-.20 ?

A bird in the hand is worth two in the bush..

[ronaldson]

I was going to say that the "sizzle" has gone for this share following recent commentary in the media, but the market is still pricing in $1.40+ while the holding pattern continues.

[X-men]

https://www.rnz.co.nz/news/business/494452/canadian-bidder-denies-it-plans-to-improve-on-eroads-takeover-offer

[Bikeguy]

A bird in the hand is worth two in the bush..

How I was thinking too…

[carrom74]

Or could be a smart ploy by volaris to catch some falling shares from some weak hands…

The last sentence of the statement is “ at this stage”…😟

[ronaldson]

ASM at 2.00pm today at Ellerslie Events Centre in Auckland.

Quite lengthy addresses from the Chair and CEO/CFO released already to NZX along with a slide presentation.

A quick read suggests ERD is on-track. I wonder what the market and Brillian will make of it. No volume above $1.40 on the buy side presently. Sellers still at $1.44. Could see some movement above that as folks get to grips with the update given Q1 figures look bright.

[Bikeguy]

This is a hard one to read…someone is definitely holding the price up on this one😅

[winner69]

In a NBR article re ASM …whatever it means who knows

Reap the rewards

Asked later by a shareholder whether any other takeover offers were likely, Paterson said it was in confidential discussions with multiple parties about various opportunities.

“We’re moving ahead, a number of them are complementary to each other. We’re certainly underway in those, looking for strategic partnerships… some might bring capital in.”

Earlier she had stressed that the board had undertaken a thorough review of Volaris’ bid alongside advisers Goldman Sachs and Chapman Tripp before rejecting it.

[X-men]

ERD has potential but the debts that I worry about.

They might need to raise capital ...

[winner69]

So at ASM Remuneration Report not adopted. More votes against than for. Not surprising.

Does that mean if it happens again the Board can be ‘spilled’ under the two strike rule …that could be fun.

Interesting


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/415470/399356.pdf

[BlackPeter]

So at ASM Remuneration Report not adopted. More votes against than for. Not surprising.

Does that mean if it happens again the Board can be ‘spilled’ under the two strike rule …that could be fun.

Interesting


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/415470/399356.pdf

Are you sure this rule applies for the NZX as well? As far as i know is this "twice rejected and the board is fired" just an ASX rule. Wrong Island.

[winner69]

Are you sure this rule applies for the NZX as well? As far as i know is this "twice rejected and the board is fired" just an ASX rule. Wrong Island.

ERoad make a big deal of complying with not just NZX regs but also the ASX regs ….good on them (maybe a hidden message in that)

They didn’t have to have this vote but chose to do. Full explanation in Notice of Meeting and this paragraph sums it up.

As a New Zealand registered company, EROAD is not required to comply with the Corporations Act. However, the Board has determined that as it seeks to continually improve its governance in accordance with evolving international best practice, it should offer shareholders the opportunity to vote on the Remuneration Report and to call a spill meeting in accordance with the Australian Say on Pay regime

If true to their word need to follow through next year …and possibly hope for a better outcome.

[BlackPeter]

ERoad make a big deal of complying with not just NZX regs but also the ASX regs ….good on them (maybe a hidden message in that)

They didn’t have to have this vote but chose to do. Full explanation in Notice of Meeting and this paragraph sums it up.

As a New Zealand registered company, EROAD is not required to comply with the Corporations Act. However, the Board has determined that as it seeks to continually improve its governance in accordance with evolving international best practice, it should offer shareholders the opportunity to vote on the Remuneration Report and to call a spill meeting in accordance with the Australian Say on Pay regime

If true to their word need to follow through next year …and possibly hope for a better outcome.

cheers - interesting, I didn't knew that.

While not holding, it might be interesting to keep them on the watchlist. Not out of interest to buy, but the potential spectacle might be good entertainment - priceless!

[winner69]

Are punters slowly giving up hope of a higher offer and selling out

[winner69]

70 cents it is ……not a new offer but a capital raise

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/417797/402433.pdf

[Rawz]

70 cents it is ……not a new offer but a capital raise

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/417797/402433.pdf

OMG... ouch.

Well it was posted a lot on this thread that the balance sheet was weak and fresh capital was needed and this is why a lot of us sold straight after the partial takeover was announced.

Guess if you are still holding you have faith in the company and will be willing to participate

[X-men]

Ruthless...better to sell the whole company at $1.30

[Rawz]

If no takeover they need a cap raise based on cash burn and balance sheet

Post this back in July

[Lego_Man]

Utterly disgraceful treatment of shareholders. You call a 1.30 offer undervalued and then stiff shareholders for half that.

[strikereureka]

OMG... ouch.

Well it was posted a lot on this thread that the balance sheet was weak and fresh capital was needed and this is why a lot of us sold straight after the partial takeover was announced.

Guess if you are still holding you have faith in the company and will be willing to participate

Why not dilute shareholders less & raise capital at 10% discount to last week's price (or something similar)?

[Rawz]

Why not dilute shareholders less & raise capital at 10% discount to last week's price (or something similar)?

Only way they can guarantee full take up is with such a large discount

[ronaldson]

Seems to be driven by the need to take up the new bank facility arrangement to September 2026, and I would say at least in part by the need to complete the swap out in NZ of the old 3G units to 4G compatible units, which is both capital and labour intensive in the near term.

ERD states it has undertaken an independently reviewed capital sufficiency modelling exercise on its forecasts for FY24 to FY26. Based upon this work ERD expects to have sufficient liquidity to meet its capital requiements for delivering on its strategy and supporting plans to the end of FY26.

Obviously there remains quite an element of execution risk going forward and the need for ongoing compliance with the banking facility covenants. So yes, the capital raise is at a fairly large discount.

[ronaldson]

No real regrets that I exited the holdings under my control recently. I wonder if Volaris were "in the loop" here or if they were excluded by virtue of the disclosure regime. I expect the latter so I wonder how committed they remain at this point. Likely no option but to take up the rights but even so given the institutional placement they could be marginally diluted?

[silverblizzard888]

No one looking at this and thinking it’s really just a poison pill for the recent takeover of the company. They priced this to mess with the takeover holders, if they don’t participate they get heavily diluted and if they do they just help the company become self sufficient to fend off any need for a takeover.

[winner69]

Our friend Madison reports

@maddireidy
EROAD launches $50m capital raise while in takeover talks with shareholder Volaris.

Volaris comes out swinging saying they won't take part and have "several concerns" with the raise, including its price.

"We were both surprised and disappointed" - Volaris statement.

[bull....]

No one looking at this and thinking it’s really just a poison pill for the recent takeover of the company. They priced this to mess with the takeover holders, if they don’t participate they get heavily diluted and if they do they just help the company become self sufficient to fend off any need for a takeover.

doubt t/o go ahead now. an asx company did something similar and t/o never proceeded after equity raise.
good for the company they get some much needed money to continue there journey

[BlackPeter]

doubt t/o go ahead now. an asx company did something similar and t/o never proceeded after equity raise.
good for the company they get some much needed money to continue there journey

True.

However - whether it is good for share holders if they continue their journey is something we only will know in years to come. Eroad so far did drive pretty erratically and choose to sink zillions of shareholder funds in their chosen export market. If they use this new money just to throw more of it into a bottomless hole, than accountants and travelling executives might be the only people benefitting from that ...

The only thing Eroad has proven to be good in, is in disappointing share holders. Do they really need more money to continue exercising their strength?

[winner69]

OMG... ouch.

Well it was posted a lot on this thread that the balance sheet was weak and fresh capital was needed and this is why a lot of us sold straight after the partial takeover was announced.

Guess if you are still holding you have faith in the company and will be willing to participate

Hey Rawz …they were listening to you

CEO reported in BusinessDesk - “ Feedback we got from investors across the board was all that ‘we'd like you to sort of see how you could sort of strengthen that balance sheet’,” Heine said.

[Sideshow Bob]

https://www.nzx.com/announcements/417965

EROAD Limited (“EROAD” NZX/ASX:ERD) is pleased to advise that it has successfully completed the fully underwritten institutional entitlement offer (“Institutional Offer”) component of its underwritten accelerated pro rata entitlement offer of 1 New Share for every 2.06 Existing Shares to eligible institutional and retail shareholders (“Entitlement Offer) and the institutional placement (“Institutional Placement”, together with the Entitlement Offer, the “Equity Raise”) of new fully paid ordinary shares in EROAD (“New Shares”) as announced on Thursday 7 September 2023. EROAD expects to raise approximately NZ$50 million under the Equity Raise.

The capital raised from the Equity Raise will strengthen EROAD’s balance sheet, giving it greater flexibility to continue its strategy of sustainable, profitable growth maximising long term shareholder value. The net proceeds from the Equity Raise will be used to repay debt, providing funding headroom to allow EROAD to further underpin its growth strategy, especially in the key North American market.

Institutional Placement

The Institutional Placement was strongly supported by a number of existing and new Institutional Investors across New Zealand, Australia and offshore raising $11.6 million at the issue price of NZ$0.70 per New Share.

Institutional Offer and Institutional Bookbuild

The Institutional Offer raised gross proceeds of approximately NZ$17.6 million with approximately NZ$4.3 million of entitlements taken up by eligible institutional shareholders. Approximately NZ$13.3 million of entitlements were not taken up under the Institutional Offer, which included our two largest shareholders who elected not to participate. However, it was pleasing to see several new and returning investors participating. Entitlements not taken up under the Institutional Offer contributed into the institutional shortfall bookbuild that was conducted on Friday, 8 September ("Institutional Bookbuild").

The Institutional Bookbuild was well supported, with all New Shares attributable to unexercised institutional entitlements allocated, and a clearing price of NZ$0.70 per share achieved.

The clearing price of the Institutional Bookbuild was the same as the Issue Price of the Entitlement Offer. Eligible institutional shareholders who elected not to take up their entitlements and whose New Shares were sold in the Institutional Bookbuild will not receive any consideration for the entitlements not taken up by them.

Announcement of A$ Price

The Australian dollar issue price (“A$ Price”) has been set at A$0.65. The A$ Price was determined using the NZ$:A$ exchange rate published by the Reserve Bank of New Zealand on its website at 3.00pm (NZST) / 1.00pm (AEST) on Friday, 8 September 2023.

Retail Offer

Eligible retail shareholders will be invited to participate in the retail entitlement offer component of the Entitlement Offer (“Retail Offer”). The Retail Offer will open at 10.00am (NZST) / 8.00am (AEST) on Tuesday, 12 September 2023 and close at 7.00pm (NZST) / 5.00pm (AEST) on Thursday, 21 September 2023. Eligible retail shareholders will have the opportunity to participate at the same Issue Price and offer ratio as the Institutional Offer. Eligible retail shareholders can choose to take up their entitlement in whole, in part or not at all. Entitlements cannot be traded or sold on the NZX or ASX. Applicants must apply via the online application process and are encouraged to do so as soon as possible.

New Shares attributable to entitlements not taken up under the Retail Offer, and those which would otherwise have been offered to ineligible retail shareholders, will be offered for subscription through a retail shortfall bookbuild (“Retail Bookbuild”) to be held on Tuesday, 26 September 2023.

Any premium achieved above the Issue Price from the sale of New Shares in the Retail Bookbuild will be paid (less applicable taxes) on a pro-rata basis to those eligible retail shareholders who do not take up their entitlements in full and ineligible retail shareholders. There is no guarantee that any premium will be achieved through the Retail Bookbuild.

Further information and shareholder enquiries

Shareholders who have any questions about the Equity Raise are encouraged to read the Offer Document and consult their broker, solicitor, accountant, financial adviser or other professional adviser.

ENDS

[winner69]

Not surprising that share price down on the TERP already

Wonder where it will settle?

[Rawz]

Heading to 70 cents.

Shocking for shareholders.

[winner69]

Heading to 70 cents.

Shocking for shareholders.

Might even go lower than 70 cents

Chair Susan good at doing these things ….didn’t she do a heavily discounted raise at STU a few years ago ….and today the share price is about the same

[ronaldson]

Might even go lower than 70 cents

Chair Susan good at doing these things ….didn’t she do a heavily discounted raise at STU a few years ago ….and today the share price is about the same

Already down to 80c and no buy support evident under, so lower definitely possible. Horrendous outcome for holders given the share price had reached the $1.40's recently. No wonder Volaris did not support the raise, nor apparently the second largest holder. Board must have felt under huge pressure to pitch the capital raise at $0.70, and clearly had difficulty getting the institutions to commit even at that price.

I wonder if a Board/Company can be subject to a class action, having rejected $1.30 and then ensured within a few weeks that the on-market share price is dumped significantly lower.

[ronaldson]

Today's NZSA Newsletter indicates ERD is holding a Q&A call with retail investors on Thursday 14 September at 12.30pm. The Q&A will be hosted by ERD's CEO Mark Heine and Chair Susan Paterson.

I looked quickly at ERD's website without finding any mention but NZSA give the link to register as https://loghic.eventsair.com/eroad/register/Site/Register if that helps.

May be time to formulate a few questions?

[winner69]

Seems to happen a lot these days …from X last week

@RonShamgar
Here’s an ASX trend where boards not acting in holders interest:

$IRE rejects $15.90 bid shares now $6.30
$PPS rejects $1.50 bid now 66c
$EML rejects $5+ & $2+ and now $1.20
$TYR rejects $1.60 now $1.30
$BTH rejects 80c now at 33c
$ERD rejects $1.30 now 70c raise

What else?

[Snow Leopard]

Things must be bad - I have been offered the 'opportunity' :scared: to buy shares in ERD.

[Rawz]

Got an email earlier today. "EOARD shortfall offer available on sharesies". oh dear

Suppose the shortfall is from Volaris?

[ronaldson]

Available at 75c on-market now.

Will there actually be any value at all in the shortfall? Might need desperate measures to achieve take up even at the issue price.

[BlackPeter]

Things must be bad - I have been offered the 'opportunity' :scared: to buy shares in ERD.

I assume the "opportunity" is that you are able to decline the offer ;) ?

[kiora]

Not related BUT
I remember participating in SKL cash issue at $0.50 in 2009
Seemed to bring SKL back to life
Will ERD issue do the same?

[BlackPeter]

Not related BUT
I remember participating in SKL cash issue at $0.50 in 2009
Seemed to bring SKL back to life
Will ERD issue do the same?

Haven't we all seen companies miraculously avoiding disaster and darting like Phoenix out of the ashes from the fire of nearly certain defeat?

It can be done ... but let's face it, even if some companies can make it - the odds are stacked against this outcome. Most just follow the trend ...

Sometimes it is better to listen to the market, but sure - market is often right, but not always ;) ;

[winner69]

Closed at 70 cents

Down further tomorrow?

[clearasmud]

Closed at 70 cents

Down further tomorrow?

Are you looking to buy?

[Rawz]

Board of directors are a disgrace. They have really screwed shareholders

[ronaldson]

Board of directors are a disgrace. They have really screwed shareholders

The vendors of Cortex got seriously screwed too, with a high proportion of the $150m+ consideration being settled by the vesting of shares at a nominal value of $6. And since that was a major transaction virtually doubling the size of ERD, and with Cortex being the dominant merging party in the US geography, most of the senior management and some of the Board come directly from these roots and I have no doubt don't wish to crystalise losses and do wish to deliver the vision. But that isn't the same as taking an objective view as to the best interests of holders that are not from that background.

Unfortunately most have now no option but to wait and see. The best situation may be for another suitor to see the same potential as Volaris and hoover up a bunch of shares on the cheap before joining forces and submitting another offer. Give the status quo 12 months to consolidate and it could be on the block 100% if progress can be shown?

[BlackPeter]

The vendors of Cortex got seriously screwed too, with a high proportion of the $150m+ consideration being settled by the vesting of shares at a nominal value of $6. And since that was a major transaction virtually doubling the size of ERD, and with Cortex being the dominant merging party in the US geography, most of the senior management and some of the Board come directly from these roots and I have no doubt don't wish to crystalise losses and do wish to deliver the vision. But that isn't the same as taking an objective view as to the best interests of holders that are not from that background.

Unfortunately most have now no option but to wait and see. The best situation may be for another suitor to see the same potential as Volaris and hoover up a bunch of shares on the cheap before joining forces and submitting another offer. Give the status quo 12 months to consolidate and it could be on the block 100% if progress can be shown?

I guess what always surprises me is that people seem to think that just because a Kiwi company is reinventing the wheel, they will afterwards take over the world in a breeze, like walking in sunshine.

I did some analysis on ERD many years ago - and neither their product nor their market position (well, except NZ and Australia) was in any way outstanding from the crowd.

I don't hold them anymore since ages and have as well no connections anymore into the fleet management crowd (I used to work as well with customers coming from that industry), so I have no up to date industry experience (though i assume that clients needs and attitudes have little changed).

However - just curious - did any of the investors do a recent analysis how ERD's product performs today related to the many competitor products?

https://www.g2.com/products/eroad/competitors/alternatives

Do you guys and gals understand how ERD's product links into larger fleet management solutions, and how this compares to the competition? Do truck drivers prefer the ERD solution? What about the fleet managers and the relevant accountants? What reasons would clients have to change from their current solution to ERD?

Anybody understanding, why they expect ERD to take over the world after stalling for more than a decade?

Again - I have no stakes in this particular game, but I find some threads just interesting to help me better understand investor psychology. BTW - interesting similarities to PEB.

[winner69]

Good comments Ron and Peter

I’d add they don’t charge enough for their offer ……need to have decent price increases ….but then some would say that makes them uncompetitive and customers would go elsewhere ….which really says ERoad doesn’t really have a sustainably profit making business.

[winner69]

Apparently former CEO and 12% shareholder Newman didn’t participate in the cap raise

Not a good sign …….but maybe no spare cash at the moment

[alex f]

A marketing company rang me this afternoon (sat) (I hold eroad shares) giving the hard sell. I wonder who employed them, the underwriter? That’s what may happen the underwriter will get stuck with them, meaning selling at a loss to get out…below 70c. Seems a bit of a cheek using my contact details for a hard sell. Reminds me of Westpac ringing to sell life insurance in the past.

[alex f]

Apparently former CEO and 12% shareholder Newman didn’t participate in the cap raise

Not a good sign …….but maybe no spare cash at the moment

He would have needed $7m to take up his full entitlement. Having just halved the share price the directors think we have lots of spare cash. They should have gone for a smaller capital raise and another in 18 months

[Sampan]

What a mess....

[winner69]

Jenny Ruth writes a piece Eroad capital raising speed and discount smacks of unexplained desperation

And pisses Chair Susan off big time who then texts Jenny with this tirade -

POSTSCRIPT: Late yesterday, Paterson texted me the following (I’ve corrected the grammar and spelling): “Reflecting on your questions, we are a great NZ company delivering unbelievable value to our clients and the world. Yes, there may be capital-raising events to provide certainty for future growth. But replacing debt for equity to give us headroom is a positive thing. It would be good if some informed commentators could provide understanding views. We are absolutely doing the right thing by the company and always will do. It’s unfortunate many commentators, who aren’t ‘in the ring’' trying to create value, are just wanting to throw stones.”

https://justthebusinessjennyruth.substack.com/p/eroad-capital-raising-speed-and-discount?publication_id=1827355&utm_campaign=email-post-title&r=1rwf26

[ronaldson]

Jenny Ruth writes a piece Eroad capital raising speed and discount smacks of unexplained desperation

And pisses Chair Susan off big time who then texts Jenny with this tirade -

POSTSCRIPT: Late yesterday, Paterson texted me the following (I’ve corrected the grammar and spelling): “Reflecting on your questions, we are a great NZ company delivering unbelievable value to our clients and the world. Yes, there may be capital-raising events to provide certainty for future growth. But replacing debt for equity to give us headroom is a positive thing. It would be good if some informed commentators could provide understanding views. We are absolutely doing the right thing by the company and always will do. It’s unfortunate many commentators, who aren’t ‘in the ring’' trying to create value, are just wanting to throw stones.”

https://justthebusinessjennyruth.substack.com/p/eroad-capital-raising-speed-and-discount?publication_id=1827355&utm_campaign=email-post-title&r=1rwf26

Excellent article. Well worth a read.

Access is still available to her journalism for free at this stage.

[Rawz]

On one hand i like the fire coming from Paterson.. like she's come out defending the path they have chosen.

But on the other hand its so hard to ignore how they have totally screwed shareholders.

Guess its up to her and the rest of the board/management team to perform and bring the SP up to around that $1.30 mark. Personally i dont believe in the story

[winner69]

On one hand i like the fire coming from Paterson.. like she's come out defending the path they have chosen.

But on the other hand its so hard to ignore how they have totally screwed shareholders.

Guess its up to her and the rest of the board/management team to perform and bring the SP up to around that $1.30 mark. Personally i dont believe in the story

Susan loves telling potential buyers to bugger off because it doesn’t reflect true value …..like she did with STU

If $1.70 didn’t reflect true value a few years ago for STU and Susan said $2.36 maybe you’d think that it would be over $3.00 by now ….what is STUs share price at the moment

[Gerald]

It’s unfortunate many commentators, who aren’t ‘in the ring’' trying to create value, are just wanting to throw stones.”

Sounds like she would get on well with "in the arena" Chamath P

[Jaa]

Prefer she was in the cab talking to customers.

[thebusinessman]

Well I felt brave enough to restock at 70c given everything that has been going on here. The other half of my shares are free carry so will see where the wind takes this one...

[ronaldson]

Well I felt brave enough to restock at 70c given everything that has been going on here. The other half of my shares are free carry so will see where the wind takes this one...

Not unreasonable, although I prefer to see the capital raise over and done with if the underwriter is to be left with stock, and the dust to settle. But the share doesn't owe me anything either just now, despite being significantly in the red until Volaris came along, so I will also consider reentering and allowing the wind to blow.....

[thebusinessman]

I considered it one of those coin flips where if potential suitors are not done yet then waiting too long to re-enter might end in a lost opportunity, vs. the potential of the stock to slide to even more attractive entry levels. History and experience has taught me that I kick myself much harder over inaction than making a wrong decision... So I jumped back in.

[winner69]

DIrectors bought up big in capital raise

All that skin in the game …..the future is bright …..and success a certainty

https://www.nzx.com/announcements/418694

[BlackPeter]

DIrectors bought up big in capital raise

All that skin in the game …..the future is bright …..and success a certainty

https://www.nzx.com/announcements/418694

So - I take it you are holdling, are you?

[Bikeguy]

DIrectors bought up big in capital raise

All that skin in the game …..the future is bright …..and success a certainty

https://www.nzx.com/announcements/418694

They had no choice but to jump in hard as a group, to back their own play, after the debacle this has turned out to be after they had to cap raise due to these “ partners who were coming on board, with the ability to put in capital” didn’t front…
There is desperation and poor ethics all over this latest chapter the board has written…

[winner69]

27% take up in retail offer …hmmmm

http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/418837/403734.pdf

[winner69]

So the book build for the shares not taken up was essentially a failure

That’s 20 million shares going the underwriters …….ouch

But Susan seems pleased with the support the company got ….great effort Susan


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/418922/403822.pdf

[BlackPeter]

So the book build for the shares not taken up was essentially a failure

That’s 20 million shares going the underwriters …….ouch

But Susan seems pleased with the support the company got ….great effort Susan


http://nzx-prod-s7fsd7f98s.s3-website-ap-southeast-2.amazonaws.com/attachments/ERD/418922/403822.pdf

Will be interesting to see how the SP develops from here ... will the underwriter consider ERD as the hidden wildcard of its long term investments ... or will they try to sell the shares at any price now?

I know what I would have done ... never sign the commitment as an underwriter!

[Poet]

Will be interesting to see how the SP develops from here ... will the underwriter consider ERD as the hidden wildcard of its long term investments ... or will they try to sell the shares at any price now?

I know what I would have done ... never sign the commitment as an underwriter!

also, what is Volaris next move? Dump the shares they have or wait patiently to acquire more at sub 70c and then launch renewed (and probably hostile) code takeover at 90c.

[Bikeguy]

also, what is Volaris next move? Dump the shares they have or wait patiently to acquire more at sub 70c and then launch renewed (and probably hostile) code takeover at 90c.

Very good questions, this is a complete shambles and one wonders how some board members actually achieve their positions…if this is the result of their strategic planning then I think someone needs to go back to the basic fundamentals of business planning…
My feeling now is that no one will move in the short to medium term, everyone has to much to lose if this craters now so the institutional investors will let this settle down then seek to move it upwards over time, with the new shares in play the numbers just don’t work for a takeover now?

[whatsup]

also, what is Volaris next move? Dump the shares they have or wait patiently to acquire more at sub 70c and then launch renewed (and probably hostile) code takeover at 90c.

If the underwriters need to off load their funded shares what is to stop them from offering them to Volaris there by increasing their holding or are they restricted to the 19.99% level ?

[Poet]

If the underwriters need to off load their funded shares what is to stop them from offering them to Volaris there by increasing their holding or are they restricted to the 19.99% level ?

Volaris had c 21m shares before the cap raise. Shares on issue after the raise will be 176m so Volalris will have 12% with ability to buy another 14m without exceeding a 20% shareholding. Whether they will or not is anyone's guess.

[ronaldson]

20.3m shares needed to be taken up by the sub-underwriters at the issue price of $0.70. Allotment occurs on Monday. This will be a significant overhang, and no sign of easy clearance given the closing price today of $0.67.

Where to now for holders?

[Rawz]

Might be able to buy back in again in the 40 cent range.

[Jenny Ruth]

Hi all. I published another column on my Substack, Just the Business, this morning under the headline: What's gone wrong inside the Eroad business?
I take a look at why Eroad's share price tanked from above $6 in mid-2021, helped along lately by a botched capital raising.
It's still free to read and you can find it here:
https://lnkd.in/grNPFWgU

[Gerald]

https://justthebusinessjennyruth.substack.com/p/whats-gone-wrong-inside-the-eroad

Good article by Jenny... Even gives ST a shoutout.

Sensible conclusion; "...that should provide some comfort that at least Eroad's directors were correct in judging the Volaris offer as too low.

It does nothing to explain why those same directors said $1.30 was too low and then decided it was a good idea to sell new Eroad shares in a great hurry at 70 cents. "

[Rawz]

That’s a good read. Basically ERD is a bit of a basket case. BlackPeter always told us that.

I’m very lucky I made some very good coin on this. Dumb luck lol

[Jenny Ruth]

Thanks for the mention - if the moderator ever lets my comment through

[ronaldson]

The two SPH Notices filed today tell us who is now left holding the bag after the underwriters were called upon for over $14m to round out the capital raise.

No sign of a willingness to dump any volume just yet. I guess no option really but to hold and hope like so many others. We will all have to wait now for time to tell.

I have considered reentering at the current sub 70c but haven't found enough motivation yet.

[ronaldson]

And today we have the Disclosure Notices for Directors and Executive Officers as to their contributions to the capital raise. The Chair didn't try very hard, but the efforts of others were more notable.

Announcement is worth a quick read and some reflection I thought.

[Jaa]

UBS sold down 1m of their 10m unwanted shares too, via a "Change in right of rehypothecation". Any guru care to explain what that means? Did they stuff the shares into their customers accounts?


Rehypothecation: the action of a broker who pledges with a bank or other lender securities already left on deposit with him by a customer as a pledge for their purchase on margin - https://www.merriam-webster.com/dictionary/rehypothecation

https://www.investopedia.com/terms/r/rehypothecation.asp

[whatsup]

10% DROP today @.60 , great buying opp for the brave imho.

[GTM 3442]

After some thought, I have changed my mind about eRoad.

Initially I thought that they had all the makings of a great investment. They provided hardware/software which was going to become important for two reasons.

Firstly for compliance with various sorts of government "road user charges" across a whole bunch of countries.
Secondly because companies could use the product's telematic data for their own internal efficiency reasons.

However that was a relatively long time ago. Now I look at the data available for something like a Tesla or Toyota car, and I can look forward and see eRoad's product being built in for future vehicles.

I think they've run out of road. I'm out and staying out

[Rawz]

if the takeover doesnt comeback to life there is no reason this cant go all the way back down to the 40 cent range

[ronaldson]

After some thought, I have changed my mind about eRoad.

Initially I thought that they had all the makings of a great investment. They provided hardware/software which was going to become important for two reasons.

Firstly for compliance with various sorts of government "road user charges" across a whole bunch of countries.
Secondly because companies could use the product's telematic data for their own internal efficiency reasons.

However that was a relatively long time ago. Now I look at the data available for something like a Tesla or Toyota car, and I can look forward and see eRoad's product being built in for future vehicles.

I think they've run out of road. I'm out and staying out

I wait and watch, but not yet brave enough to reenter.

A failure to grant proper due diligence to Volaris at $1.30, followed within a very short space of time by a capital raise at $0.70, and now trading in the low $0.60's is an unusual state of affairs albeit the latter is not unanticipated given the call on the underwriters.

If we multiply the number of shares on issue by, say, 0.63 we get an enterprise value of about $116m. It's only 18 months ago that ERD paid $168m for Cortex, to bulk up and revitalise the US operation and the Australian and NZ operations, which were about equivalent in size, are marginally profitable. So logically if they can execute the signaled turn around over the next 12 - 18 months the situation could recover somewhat.

But GTM makes the case that technological progress in vehicle manufacture is going to disrupt the underlying business case to at least some extent. We shall have to wait and see.

[winner69]

Read somewhere that US truck manufacturers are incorporating such software and componentary (not Eroad) into new models

[winner69]

ERoad CFO doing a NZX Investor thing tomorrow 11am

https://register.gotowebinar.com/register/2066286245912313176

[whatsup]

After some thought, I have changed my mind about eRoad.

Initially I thought that they had all the makings of a great investment. They provided hardware/software which was going to become important for two reasons.

Firstly for compliance with various sorts of government "road user charges" across a whole bunch of countries.
Secondly because companies could use the product's telematic data for their own internal efficiency reasons.

However that was a relatively long time ago. Now I look at the data available for something like a Tesla or Toyota car, and I can look forward and see eRoad's product being built in for future vehicles.

I think they've run out of road. I'm out and staying out

Yeh, I remember about 20- 30 years ago when some bright guy came up with the idea of etching the vehicles number plates in the glass in vehicles ( to thaught the thieves stealing and changing number plates ) and offered franchises to investors, didnt take long before new vehicle sellers offered that service as part of the purchase price, guess what happened ?

[Jaa]

Read somewhere that US truck manufacturers are incorporating such software and componentary (not Eroad) into new models

What do you do with a mixed fleet?

Surely the value is in the integration and software. Getting out of the hardware business would be a big win for Eroad as it requires a lot of capital. Without hardware a services only Eroad would then be valued as true SaaS business (a lot higher).

[ronaldson]

ERoad CFO doing a NZX Investor thing tomorrow 11am

https://register.gotowebinar.com/register/2066286245912313176

I watched this presentation. No new information, or explanation around recent circumstances. Only 61 folk online for the webinar.

[Jaa]

Good to see Eroad signing large enterprise contracts with Programmed, Kinetic, Boral and Woolworths.

Just as I said, Progammed value Eroad's ability to combine assets into a unified platform. ie integration and software!


In Australia, EROAD signed a new five-year partnership with Programmed, a significant enterprise customer. Programmed is a leading provider of Staffing, Facility Management, Maintenance and Care services, and has signed a five-year contract for the MyEROAD telematics cloud platform to be deployed across a fleet of more than 2000 vehicles and 1000 assets. This is a five-year partnership set to enhance over 3000 Vehicles and Assets in Australia.
..
The value EROAD provides is in large part due to its ability to digitise and combine fleet and assets into one unified platform. Once installed, customers benefit from a complete view of operations, enabling seamless tracking, utilisation reporting and service and maintenance.


“We are also pleased we are expanding our partnership with Kinetic NZ, who were originally a Coretex customer, which is an important vote of confidence in the work we have done to successfully integrate Coretex and EROAD since the acquisition of Coretex in 2021.”


Boral has resigned and expanded with EROAD and Woolworths have selected us as preferred supplier after a competitive tender process. The partnerships span 4,345 units in 5-year deals.

https://www.eroad.co.nz/lp/shareholder-update-october2023/#1696977284698-b428c1a9-f086

Few boxes ticked.

[Mel]

Very difficult to pick the floor on this stock - surely it can't fall much further!

[GTM 3442]

Very difficult to pick the floor on this stock - surely it can't fall much further!

I was buying at $0.55 before the last capital raise. I’ll be interested again at $1.50/odd.

In the meantime. . . I expect a long wait. . .

[ronaldson]

Half year to 30 Sept financial and operational result due 29 November. I wonder if any green shoots will appear? Probably too soon for anything so magical.

[Rawz]

Half year to 30 Sept financial and operational result due 29 November. I wonder if any green shoots will appear? Probably too soon for anything so magical.

wouldnt have done the cap raise if all was honkey dory

was mentioned here after full year that if things continued as is they would need a cap raise. so i am expecting to see much the same. i.e. bleeding cash and small loss

[Rawz]

this is pretty good from Chris Lee:

IF your knowledge of ERoad was gathered only from reading newspaper comment, or from its formal stock exchange releases, you might conclude that its Albany headquarters resembles a funeral house, gloom prevailing.

In short ERoad shares have fallen by 90% as it has continually reported that it needs more time to achieve its global goal, and has continually attracted scorn from random media commentators.
Its New Zealand business is undoubtedly a stunning success, having captured around 80% of the truck market, achieving very positive cash flow and profit. Its value is undoubted. Its users rate the products highly.

Though there have been no reports from ERoad, its investment bankers quietly acknowledge that its NZ business would attract buyers at nearly double the current market capitalisation of the whole business.

The market doubt has stemmed from the slow progress in getting its various hardware products into trucks in Australia and the USA.

Slow progress is not no progress. I will outline progress in the paragraphs below:
Despite its NZ success - undeniable - it has had bad press and endured comment that could be described as ignorant. Much of this press behaviour is understandable.
ERoad handled the long-threatened exit of its founder, Steve Newman, very poorly, virtually dumping the surprise exit on the investment world with far too little explanation and with no comforting strategy to replace him or retain access to his input.

Some of this was Newman's fault. He effectively tossed his rattle, though not selling his shares, because his board was not enabling him to back off his commitment to his own plans.
The company’s chairman at the time behaved as though he was unprepared for the event and its acting CEO, now the CEO, behaved in keeping with his legal training, as though he was dear old Jack Sullivan, chairman of the rugby union in the 1960s, who would continually parrot the words “no comment” to any passing newspaper reporter.
The media attacked. I, too, was very critical of ERoad’s response. The share price tanked.

The next controversy arose when a Canadian investment fund sought to take over the company for a price roughly double what the price had been months earlier.
ERoad’s board dismissed the offer, declined to allow the Canadians access to the business, loftily saying the bid undervalued ERoad but unexpectedly declining to explain why the bid for the underlying business was at an unacceptably high discount.

The explanation was simple. Others would pay for the NZ arm alone more than the Canadians would pay for the whole business. Why did ERoad not disclose this?
Furthermore ERoad was observing real progress in Australia and the USA, given the enthusiasm of trucking companies for the new hardware ERoad had developed.
The NZ business was and is still growing. The Fleet Day that two of our advisors attended provided ample evidence of customer support.
Yet none of this has been well articulated by the ERoad chairperson or chief executive.

The CEO, Mark Heine, is running an impressive, progressive business and is a thoroughly decent, likeable fellow but his commitment to communication has been inadequate. Lawyers are trained to be furtive.

Susan Patterson, the chair of the board, caused a third issue when she advised ERoad needed no new capital, just a few months ago.
But when the company's advisers, Craigs and Goldman Sachs, later promoted to the board the idea of a new fee-heavy rights issue, ERoad accepted the idea, contradicting Patterson's previous statements. Perhaps ERoad accepted that in a deteriorating global economy, capital might be harder to find.

The media waded in, unaware of the underlying business, obviously sensing blood.

None visited the company. None appears to have penetrated ERoad’s apparent dislike of communicating. Is this a commentary on the media or on ERoad?
The board and the CEO hunkered down, focusing solely on progressing sales, cutting costs, and accelerating the day when ERoad will stop burning cash and will begin to eliminate debt.
New Zealand business media is not exactly the equal of the best of the Financial Times people, whose credibility and experience gets them into boardrooms where they are treated respectfully, and given detailed insight into the sector and the business.

Indeed many of NZ’s best business leaders simply do not talk to the media except at superficial levels, some preferring to avoid the risk of being misunderstood or misquoted by media people with little or no experience in the real business world, there being very few exceptions.

As an example, Infratil, an outstanding performer in a narrow range of business activities, for many years would not invite the media to analyst days and spoke mostly at headline level when answering media enquiries. It sticks to platitudinous stuff when briefing the media.

In very recent years it has relaxed its stance a little with no apparent damage, though naturally it never discusses sensitive subjects until they are executed.

The unwillingness to educate the media is understandable but the consequences have been unhelpful, as ERoad’s media relationships have illustrated.

The truth is that ERoad now has a range of hardware products with at least one piece of hardware in at least 100,000 US trucks.

The hardware is leased for monthly amounts, varying from a few dollars to tens of dollars. Hardware is rarely returned. The vast majority of leases continue indefinitely. The software behind the hardware does its job well, a credit to its designers.

ERoad’s hardware includes a computer that calculates road tax, its original product. Other hardware items report on maintenance, another observes the driver behaviour and offers live reports on the driver for safety purposes. The latter technology is well endorsed by market regulators.

Other hardware produces live footage of road traffic and this is used to report definitively on any collision.

Hardware monitors the conditions of sensitive goods; for example, food refrigeration and the rotation of the barrel of a cement truck (cement rotation to avoid solidification is sensitive and needs monitoring).

Other hardware provides live advice on optimal routes for trucks, with deadlines and penalties for late delivery.

You can also assume that the inevitable shift to road taxes for motor cars will be relevant to ERoad.

The company does have a story to tell, and it is a story that is backed by product development and sales successes, albeit at a moderate pace.

ERoad expects that by 2026 it will be significantly profitable, reducing and gradually eliminating debt, funding its hardware from sales rather than from bank debt. It should be cash-flow positive.
It is not a cot case, as the irritated, and often under-informed, media is likely to suggest.
It needs to do two things urgently.

It needs to communicate with its shareholders, including the institutions, and display its progress. If it does not want to be pestered by exploitative takeover offers, it needs to get its share price lifted by achievement.

The other need is to be avuncular to the NZ media, at very least tolerating them, and teaching them about the sector and its planned, profitable future in that sector.
It could make one further concession, showing investors a way to profit from the progress.

I will leave its CEO and board to discuss a suggestion that might help.

ERoad does have some smart people and it does have clever software. It is growing its client base. It needs time.
And it needs to learn how to communicate with the media, even with people not obviously relevant to its progress.

[BlackPeter]

I trust you cleared the copyright issue with Chris? He is sometimes a bit peculiar around that (and so he should ;) );

Apart from that - good to read, and Chris (whom I do highly respect) often provides a different view, sourced through his good connections.

However - one of the lessons I learned the hard way is that none of us (and this includes him as well as ERoad) can predict the future ... i.e. I would take the 2026 prediction with a ton of salt. And remember - too much salt is not good for your health :) ;

[winner69]

Chris has loved ERoad since the IPO …a faithful follower and probably still hoping like anything it’ll all come right …one day

https://www.chrislee.co.nz/newsletter-archives-view&list=1&month=October&year=2017

[ronaldson]

The market depth in this stock is currently suggesting a change in sentiment to the upside. If sellers can hold their nerve I think we will see some movement to at least the mid 70's and possibly even more by the time the half year results are announced.

The most compelling factor for this industry is that the shift to battery powered vehicles, whether fully or hybrid, surely means that road user charges must soon be introduced for all rather than some vehicles, to replace the present fuel tax regime. And that should give significant momentum to the suite of products ERoad provides in all jurisdictions, unless vehicle manufacturers can re-engineer to incorporate similar solutions at first instance which doesn't seem to be any sort of priority across the main producers just now.

One of the more interesting companies on the NZX in my view.

[ronaldson]

Heavy turnover already this morning at $0.72. Results announcement due on Wednesday 29th may be supported by some forward looking commentary which could enlighten given there seem to have been several recent client "wins" in various of their jurisdictions lately. Obviously these are capital intensive initially to provide the necessary hardware to underpin and revenue will take time to flow but the general impression is positive.

Anyway, given the hugh overhang of stock held by the underwriter/s and other holders at $0.70 from the recent capital raise the current on-market pricing is encouraging.

Disc. I couldn't resist reentering here and picked up 12k at $0.70 later on 6 November.