TIDMCRS
RNS Number : 1800C
Crystal Amber Fund Limited
18 February 2022
18 February 2022
CRYSTAL AMBER FUND LIMITED
("Crystal Amber Fund" or the "Fund")
Crystal Amber Fund requisitions General Meeting of Allied Minds
plc
to propose the removal of the Chairman, Harry Rein, as a
director
Crystal Amber Fund, the activist investment fund, announces that
it has sent to the board of Allied Minds plc ("Allied Minds") a
requisition notice requiring Allied Minds to convene a general
meeting at which a resolution will be proposed to remove Harry Rein
as a non-executive director.
Since November 2018, the Fund has been an investor in Allied
Minds and currently owns 18.2 per cent. of its issued share
capital.
In 2019, Allied Minds announced that it would henceforth focus
on maximising returns and shareholder distributions from its
existing portfolio, rather than continuing to invest in new
businesses. The portfolio contains three significant holdings:
Federated Wireless, BridgeComm and Orbital Sidekick.
In March 2020, Harry Rein was appointed Chairman of the Allied
Minds board, having joined the board in November 2017. In January
2021, following a strategic review, Allied Minds introduced what it
described as "a new form of governance better suited to achieve
value creation." With no Chief Executive, Allied Minds is now
managed by its three non-executive directors. The Fund considers,
in practical terms, that Harry Rein is the key decision maker. The
2020 Report and Accounts for Allied Minds states that "the Chairman
is responsible for the leadership and conduct of the board."
Since Harry Rein has become Chairman, the share price of Allied
Minds has declined by 40 per cent. Over the same period, the NASDAQ
US Small Cap Index has risen by 85 per cent. Over the last 12
months, the share price of Allied Minds has fallen by 36 per
cent.
The Fund has conveyed several concerns to Harry Rein
including:
1. Lack of updating market participants regarding core portfolio
company Federated Wireless Inc. ("Federated Wireless"), where the
current carrying value significantly exceeds the market
capitalisation of Allied Minds. In April 2021, at the Capital
Markets Day held by Allied Minds, it was disclosed that revenues
for 2021 for Federated Wireless were forecast to be $17 million
with $35 million to $45 million expected for the year to December
2022. It was stated that during Q3 of 2021, the company would have
"a really good idea" of the 2021 outturn. In August 2021, Allied
Minds reported that Federated Wireless had met its revenue
expectations for its first half and was on track to meet its full
year plan. In October 2021, house broker, Numis Securities wrote:
"Federated Wireless accounts for c.26p NAV per ALM share (but is
likely worth a multiple of this) in our view, and, most
importantly, the company keeps producing more evidence to assure
that it is on track to turn over $17m in FY21 and $40m in FY22, and
earn high, SaaS-type, profit margins." The Fund believes that price
sensitive information is being withheld.
2. The publication of a "rogue" press release by Federated
Wireless, a company also chaired by Harry Rein. In November 2021,
Federated Wireless issued a press release stating that revenue
growth was four times higher than expected. When Crystal Amber
wrote to Harry Rein to seek clarification as to why this
information had not been released to market participants, Harry
Rein responded: " A marketing manager at Federated released the
initial Federated release without the Board of Federated's
knowledge." The release was subsequently amended to exclude any
reference to revenue growth.
3. Breach of provision 20 of the 2018 UK Corporate Governance
Code. No external search consultancy was used to identify and
recruit Bruce Failing as a non-executive director.
4. Bruce Failing acts as the Senior Independent Director but the
Fund does not believe he is independent: both Bruce Failing and
Harry Rein are directors of DelliveryCare RX. Bruce Failing was
proposed by Harry Rein who advised the Fund that he "persuaded
Bruce Failing to join the board."
5. Breach of provision 24 of the 2018 UK Corporate Governance
Code. Harry Rein is a member of the Audit Committee.
6. Withdrawing of paid-for research from Edison, after the Fund
highlighted an error with the percentage holding in a portfolio
company. Edison also apologised for a previous error pointed out to
Harry Rein by the Fund: for several months, estimated net asset
value had been materially overstated, as a result of not deducting
the special dividend paid to shareholders in February 2020. It
would appear there was a lack of oversight of these figures from
Harry Rein.
7. Failure to invite investors to the 2021 Capital Markets Day:
invitations were only sent to analysts and not to investors. The
Fund was aware of two (paid for) analysts who cover Allied Minds
being sent invitations. Subsequently, investors were made aware of
the Capital Markets Day, with only a few days' notice. The
company's broker subsequently apologised to the Fund for this
error.
In its engagement with Harry Rein, the Fund has found him to be
a major impediment to value protection and realisation. Moreover,
his track record evidenced by the concerns outlined above, speaks
for itself. Over recent months, on a number of occasions, the Fund
has asked Harry Rein to announce his resignation. He has declined
to do so. Therefore, in order to safeguard against any further
erosion of shareholder value, the Fund is now seeking his
removal.
For further enquiries please contact:
Crystal Amber Fund Limited
Chris Waldron (Chairman)
Tel: 01481 742 742
www.crystalamber.com
Allenby Capital Limited - Nominated Adviser
David Worlidge/Liz Kirchner
Tel: 020 3328 5656
Winterflood Investment Trusts - Broker
Joe Winkley/Neil Langford
Tel: 020 3100 0160
Crystal Amber Advisers (UK) LLP - Investment Adviser
Richard Bernstein
Tel: 020 7478 9080
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