It’s official: Bigtincan Holdings (ASX:BTH) will be owned by San Francisco-based private equity firm Vector Capital in the wake of today’s shareholder vote on Thursday, April 3. Shareholders will receive 22 cents a share.
This deal was never really in doubt for the AI-driven sales enablement platform provider, as it was backed by 30% stake-holding institutions – Regal Funds Management and SQN Investors.
Those institutions wanted the Vector cash-out deal, despite there being a higher-priced option on the table from Investcorp AI Acquisition Corp (IAAC SID), that could have seen the company on a path to the Nasdaq. That offer valued shares at more than double Vector’s price – at about 48c.
What disappointed smaller shareholders may not realise (and there are many) is there’s a clear link between SQN and Vector – and I’ll get to that in a moment.
Instos wanted cash for holdings
You’d think the 48-cent offer would be a no-brainer over a 22c deal right?
But despite already carrying a huge loss – having bought into BTH at around 80c a share – Regal Funds Management and SQN wanted cash for their holdings, rather than Investcorp’s higher value share-based takeover option.
That option – and the chance of Nasdaq success – is what many smaller shareholders preferred, even though BTH’s management understood that the Investcorp offer provided ‘less certainty.’
The bottom line is institutional investors did not want to accept Investcorp’s offer.
So why did instos want to lock in a loss?
SQN Investors bought at 80c and now they’ll be selling to Vector Capital at 22c.
Overall, the deal values the company at A$183 million and will see BTH leave the ASX.
BTH is believed to have been one of the biggest AI players on the ASX, achieving as much as 25% of its revenue directly from AI products.
David Keane says the Vector purchase is proof that big U.S. investors will invest into a successful Australian company.
And maybe not all BTH’s knockers might really think poorly of the company and its potential.
Those knockers include the founder of SQN Investors, Amish Mehta. SQN is one of the institutions with the voting power that confirmed the Vector Capital deal.
Case in point: SQN’s Mehta was quoted slagging off BTH in the AFR on December 6, when he said: “Of the 110 investments SQN has made, this is the single worst.”
It could be true, but why is that so interesting?
Well, that was two months after he signed up to work for Vector Capital in the role of MD, and as a member of its Investment Committee.
A committee that already liked BTH enough to want to buy it and had been discussing a takeover since last June.
A committee that must have believed it could make a good buck here and pretty quickly (watch closely because some insiders are thinking this company might realise a far higher value in the number of years you can count on one hand!).
A committee that could get the vote from big institutions with skin in the game – SQN alone was already holding more than 9%.
Mehta is – in a way – both the seller of BTH and buyer. Through Vector he’s now seizing the opportunity that was SQN’s failed investment!
The buyer and supporter
Vector Capital – which Mehta now leads – has invested in and sold out of significant businesses, including Rocket Lab USA, which is an aerospace manufacturer and now trades on the Nasdaq making Vector one of the leading tech-focussed private equity (PE) investors.
As for Regal, which had been a strong supporter of Bigtincan since before its IPO, Keane says: “The common view is that due to the change in market conditions away from growth-oriented tech, together with the need for Bigtincan to continue to invest in AI, meant that ASX institutional investors felt that a strong global investor was needed to drive the company to the next level.”
Moving forward…
David Keane and his management team have been promised their roles will continue and they’ll get to guide the strategic direction of the company and serve their customers.
Keane understands Vector Capital plans to expand the Hobart-based AI team, and he hopes this investment in Australia will continue.
“This deal is important because it shows that Aussie technology can be world-leading,” he said.
“We can build great companies by focusing on the core product offering and can find a way to move internationally from a public company base.
“The deal allows Bigtincan to accelerate innovation and product development without the constraints of public market pressures, ensuring continued investment in AI, automation, and platform enhancements.
“The market is at a pivotal moment, with AI reshaping the future of sales enablement. This deal ensures Bigtincan has the resources and strategic flexibility to lead this transformation while competitors face financial constraints.
“While in some ways it’s bitter-sweet to leave the ASX – I have to acknowledge that Vector Capital’s investment validates Bigtincan’s long-term potential, ensuring it remains well-funded for future growth. It provides certainty.”
Successes
Bigtincan has celebrated its share of success in the marketplace.
Its customers include global enterprises, including 100 of the Fortune 500, from Nike, Seek (ASX:SEK), and GUESS to AT&T, Prudential, Merck, Red Bull, and Starwood Hotels.
Bigtincan has been named in the Top 25 Companies in Sales Enablement for 2024 by The Software Report. And, CEO David Keane was listed as one of the Top 25 Executives in Artificial Intelligence.
Bigtincan is the first enablement provider in the Microsoft 365 “Works With Copilot” app store.
It has a suite of AI capabilities under the GenieAI umbrella, which spans the entire platform and includes Genie Assistant, SearchAI, AuthoringAI with translation, MeetingsAI, CoachingAI, and RolePlayAI.
Challenges
Building and growing Bigtincan has seen David Keane and his Board face many challenges.
“Many things would have produced different outcomes,” he said.
“Certainly, the challenge of needing to invest ahead of the market in new technologies, and the results of the required capital raising in 2024, will only be judged in future years.
“It could prove to have been a mistake, however, it could also prove to be the beginning of what creates a significantly more valuable business under the Vector umbrella.”
Out of the company’s control…
While investors love to see the value of their shares skyrocket and gain the windfall that can come from selling into a spike or on an upward trend, it may become overvalued in that process and that’s likely outside the direct control of company management.
In the case of BTH, if you got caught in the hype, and you bought at a peak that never returned, it could be a very painful experience. In August 2021, BTH traded at $1.36, with many who purchased during the run making significant returns.
There are also some not-so-happy traders who bought BTH at the wrong time.
For full disclosure. I was one of those shareholders.
So, I guess I’ve been well qualified to write this.
BTH last traded at 22cps.
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