Precise seeks funding to weather smartphone biometrics dip
A second proposed share issue for Precise Biometrics in less than a year – after the previous one disappointed — has the company’s new CEO on the defensive.
Patrick Höijer announced April 3 a share issue expected to raise about SEK 40.5 million (US$3.89 million) to fund primarily algorithm development for new verticals and expansion into the United States, and it would seem that the move has some people asking questions.
Höijer described the move as “bitter medicine” for returning the company to a position of long-term growth.
Share issues that raise cash at the expense of share value dilution are not unusual. They often come up when markets fall precipitously without a solid hope for a near-term recovery.
Right now, mobile phones that carry fingerprint-scanning components – components that require the algorithms written by vendors like Precise – are not selling to anyone’s satisfaction. A quarter of the company’s turnover in fiscal 2022 came from biometric systems.
That is not Precise‘s only problem, at least in the stock market’s view. Company shares peaked in 2015 and except for one apparently aberrant spike in 2016, it has been a long slog down with occasional feints.
Höijer pushed out an explanation for the new issue this week including sort of a FAQ for shareholders that pointedly questions the wisdom in the move after last fall’s issue.
Market conditions, he writes, pulled shares during the subscription below the subscription price. It would make no investment sense to buy into the share issue at prices higher than what the market is bearing, so, Höijer says, the subscription sold less than half of the shares that the company expected.
He says some might wonder why Precise bought EastCoast for SEK 80 million ($8.8 million) when it is apparent that the biometric market as a whole is hurting. That buyout was right, he says. It has borne a new brand, called YOUNiQ Visit, and the new issue would support the brand’s upcoming launched in the U.S.
And decision-makers will have skin in the new issue, he says. Shareholders always are wary of their company’s leadership not making the investment that they do.
“Everyone in the management team and on the board has announced their intention to subscribe to the new share issue,” he writes.