Allied Minds is a technology investment company with a concentrated portfolio focused on early-stage spin-outs from US federal government laboratories and universities.
Allied Minds made significant progress in FY19, focusing on its slimmed down portfolio of seven investee companies, with strategic funding rounds for Federated Wireless (FW) and HawkEye 360, before the sale of HawkEye 360. Recurring central costs have been cut to $6m in FY20, with a headcount of seven. Post the period-end, FW announced partnerships with AWS and Microsoft Azure with initial revenues expected in FY20. Parent cash at 31 December 2019 was $84.1m. The company no longer discloses NAV, but we estimate net cash at 4 June 2020 of $31.9m (adjusted for the 12.6p special dividend, investments and costs) and NAV of 90.9p/share (78.4p/share fully diluted). Based on seemingly conservative valuations, the shares trade at a 56–62% discount to our estimated NAV.
After a difficult 2019 for patient capital, the investment company sector is staging a mini-revival in Q220, with investors seeing value in the widened discounts to NAV as COVID-19 fears ease. We expect investors to prefer stocks that demonstrate progress and offer the potential for meaningful exits in a realistic timeframe. Transparency, consistency of performance, capital preservation and investor returns are the key metrics by which to judge success.