Investment in Smarttech247 and placing
Total voting rights
Highlights
· €1.4 million investment in Smarttech247, a leading global artificial intelligence cybersecurity business with a focus on threat detection, investigation and response, with over 50 customers, including the Institute of Cancer Research UK and Aryzta Global
· Placing to raise £1.64 million from existing shareholders and new investors at a price of 1.7 pence per share
· Smarttech247 is an established profitable business with significant growth potential and an intention to seek a stock market listing in the short term
· Automated, AI cloud-based cyber security is a fast-growing sector as threats to businesses continue to intensify
· Cybersecurity is a global market sector growing rapidly and is currently worth in excess of US$150 billion
Philip Haydn-Slater, Non-executive Chairman of RGO, said:
“This is a compelling investment opportunity for RGO as it provides an opportunity to invest in a very attractive and high growth technology sector through an established company with a proven track record. At the same time, it is very complementary to and is balanced with our existing investment portfolio, particularly as we grow our investment portfolio in the technology sector. We are also delighted to welcome Chris Akers as a new significant shareholder and are hugely encouraged by the support from our existing institutional shareholders who have participated in the placing.”
Introduction
RiverFort Global Opportunities plc is pleased to announce that it has agreed to invest €1.4 million in Smarttech247 (incorporated in the Republic of Ireland as Zefone Limited) a global artificial intelligence (“AI”) based cyber security cloud business that protects enterprises as they migrate to cloud-based IT operations (the “Investment”). Smarttech247 is a growing business, with financial results for the current financial year expected by Smarttech247 management to be significantly ahead of 2020. Smarttech247 has over 100 technology partners (including Tanium and Crowdstrike) and 50 clients based in Europe and the USA. It is intended that the funding shall accelerate Smarttech247’s extension and roll-out of its AI-based cyber security product portfolio.
The Investment will be via a convertible loan note and will form part of an overall fundraising by Smarttech247 of €2.5 million. The convertible loan note carries a coupon of 5% and is expected to convert on a sale or listing of the company.
At the same time, the Company has placed 96,470,587 new ordinary shares (the “Placing Shares”) to raise gross proceeds of £1.64 million in cash at a price of 1.7 pence per new ordinary share (the “Placing Price”), representing a 12.8% discount to the closing mid-market price on 7 May 2021 (the “Placing”). The purpose of the Placing is to provide funding both for the Investment and for other investment opportunities. The principal investors in the placing include the Company’s major existing institutional shareholders and new investors which include Mr Chris Akers. The Placing is being undertaken within the Company’s existing authorities to allot shares and is conditional on admission to trading on AIM.
Placees will also conditionally receive one warrant for each ordinary share subscribed for, exercisable at 3.4 pence for a period of two years from their date of issue (the “Warrants”) and expiring on the two-year anniversary of the date of issue . The issue of the Warrants will be conditional on shareholder authorities to be sought at the next Annual General Meeting.
Application will be made to the London Stock Exchange for the Placing Shares, which will rank pari passu with the Company’s existing ordinary shares, to be admitted to trading on AIM (“Admission”). Admission is expected to take place on or around 10 June 2021. Peterhouse Capital acted as broker to the Placing.
Information on Smarttech 247
Smarttech247 is an established company in cybersecurity management with a successful track record of revenue growth and profitability and is positioned at the intersection of three major cybersecurity growth markets:
• Security threat incidents
• Growth of cloud adoption amongst both large and small-medium enterprises
• Proliferation of cyber-security data generation that needs to be integrated
Smarttech247 is able to provide 24/7 threat detection, investigation and response. The company has over 80 employees, 50 customers, 100 technology partners and multiple security operation centres across Europe.
For the period ended 31 July 2020, the company reported audited profits before taxation of €829,000 on revenue of €4.8 million. Smarttech247 has contracts with enterprises that include the Institute of Cancer Research UK, Aryzta Global and the Royal College of Surgeons Ireland. Smarttech247 expects to use the proceeds from its fundraise principally to invest in building its marketing presence and for recruitment in order to expand and roll-out its AI-based cyber security product portfolio. More information on Smarttech247 can be found on its website at www.smarttec247.com.
Smarttech247 has indicated its intention to seek a stock market listing in the short term and the Board therefore believes that an investment in Smarttech247 at this juncture, given the progress that it has made to date, represents a good opportunity for RGO and its shareholders.
Information on the cybersecurity industry
There is currently a high level of cybersecurity threat incidents which is creating a need for new and better security products and services. Furthermore, cloud migration means that companies need to redesign their existing systems which is generating new cybersecurity requirements.
Cybersecurity applications are also being re-engineered to include cybersecurity reporting which is increasing the generation of cybersecurity data. A shortage of qualified specialist skills and associated cost is leading companies to adopt external automated cyber-security platforms. These trends are creating increasing demand for AI based cloud cyber-security platforms which can be provided by Smarttech247. Fortune Business Insights currently value the cybersecurity market at US$153 billion, which is growing at 12% pa and therefore projected to be worth US$366 billion by 2028.
Background to the Placing
The Company has been generating attractive returns through investing generally by way of structured products which have the benefit of delivering cash returns whilst providing downside protection. At the same time, the Board is seeing an increasing number of pre-IPO investment opportunities where there is potential to achieve gains between the pre-IPO stage and a listing or exit. The Company has already deployed capital in this way as demonstrated by its recent investment in Pluto Digital Assets plc (“Pluto”), a company that is not only in an exciting sector but is seeking a stock market listing in the short term. Furthermore, at this stage of a company’s development, valuations can be attractive, notwithstanding the proximity of an investee company to an exit or listing.
The Investment is also consistent with the Company’s wish to increase its exposure to the technology sector – RGO already has a substantial shareholding in Pires Investments plc, the investment company listed on AIM, focused on investing in next generation technology, which has increased in value significantly both since RGO first made its investment and during 2021, and its more recent investment in Pluto.
The Board is therefore keen to be able to have additional funds to deploy in these opportunities as well as to continue to invest by way of structured products.
Total voting rights
In conformity with DTR 5.6.1, the Company notifies that at Admission, the number of ordinary shares in issue will be 775,404,187. There are no ordinary shares held in treasury and each ordinary share entitles the holder to a single vote at general meetings of the Company. This figure may then be used by shareholders as the denominator for the calculations by which they will determine if they are required to notify their interest in RGO under the FCA’s Disclosure and Transparency Rules .
