The Trendlines Group

[ghchua]

Hi weijian,

FY23 was not the year for VCs. If you look at Hotung FY23 result, their Israel portfolio has a NT$172,052,000 fair value losses. Captii's VC portfolio also didn't do well.

I guess we cannot judge the effect of The Trendlines Group's strategy change just by looking at their FY23 results. It had been a bad year generally for most VC companies.

[weijian]

The Israelites are back to ask for money to invest (spend). I reckon plenty of distressed startups looking for money to bootstrap (burn) in the face of the prolonged war which has increased burn rate and churn rate. As usual, it is expected that the war will continue to transform and disrupt existing business models. The new money raised will be a value proposition to startups. With more in the war chest, we have first mover advantage to pivot into lean startups that has demonstrated scalability and are in a great position to penetrate new markets with a long runway.

How does the above pitch deck sounds?

PROPOSED NON-RENOUNCEABLE NON-UNDERWRITTEN RIGHTS ISSUE OF UP TO 73,641,050 NEW ORDINARY SHARES IN THE CAPITAL OF THE COMPANY

S$0.06 per Rights Share. 28% to the closing price of S$0.083 per Share for trades done on the Catalist Board of the Singapore Exchange Securities Trading Limited (“SGX-ST”)

One (1) Rights Share for every fourteen (14) Shares held by Entitled Shareholders (as defined below) as at the
Record Date, fractional entitlements to be disregarded. The allotment ratio is computed based on up to approximately S$4.4 million proceeds to be raised, divided by the Issue Price.

Direct and indirect investments into existing portfolio companies - 100%

https://links.sgx.com/FileOpen/Trendline...eID=793215

[ghchua]

Hi weijian,

I think you have mistaken. The rights issue is undertaken to fund existing portfolio companies to maximize exit proceeds. They have already stopped making new investments.

The fact is that if existing portfolio companies do not have access to funding, they might have to write-off more of them. Its a chicken and egg issue. Either you pump in more money to ensure that those most promising companies in the portfolio survives or you risk writing them off with no exit proceeds in future.

[weijian]

hi ghchua,

How long have some of these "promising" companies been in the portfolio? How much more money do they need before they start giving back? Does raising money via equity at below NAV, to buy more of something (let's say at NAV), a good use of money? What happened to all the money (~14mil USD) raised in the last 2years?

Putting in more money to keep alive a chance for it to be returned in the future, sounds very much like a scheme where it took on the name of a person who goes by the first name, Charlie.

[ghchua]

Hi weijian,

This rights issue is a small one, 1 for 14 and therefore the dilution to NAV is not too large. The fact it had been offered as a rights issue I think is mainly because of the discount to market price. If they had issued those shares at a premium to the market price (as they have done previously), they would have just do a placement issue.

Most of the money raised in the past 2 years had been invested into new and existing portfolio companies. As you can see, portfolio valuation had gone down significantly in the past year. Indeed, their performance had been disappointing to date. But the past year had not been good for VCs and I have cited Hotung result too previously for their Israel portfolio.

I don't think their strategy is to keep each and every company in the portfolio alive. It just couldn't work. The focus is to help advanced stage portfolio companies exit. Remember they have just switched into this strategy for only one year, and then the war broke out. It was unfortunate, but I guess more time is needed to see the benefits of their new move.

[weijian]

These guys deserves some best sales award. In an alternate universe, they could have setup some direct sales beauty products, give out awards to staff during year-end gala dinner and make tens of millions of salaries.

On a more serious note, there is a familiar name Stone Robert Alexander which many VBs should recognize putting in 405 grand of his money to increase his stake.

THE PROPOSED SUBSCRIPTION OF AN AGGREGATE OF UP TO 76,576,577 NEW ORDINARY SHARES IN THE CAPITAL OF THE COMPANY AT A SUBSCRIPTION PRICE OF S$0.06 FOR EACH ORDINARY SHARE

The Subscription Price of S$0.06 represents:
(a) a premium of approximately 4% to the weighted average price of S$0.0577 per share in the capital of the Company based on the trades done on the SGX-ST on 4 July 2024, being the full market day on which the Subscription Agreements were signed; and (b) a premium of approximately 1.7% to the prevailing market price of S$0.059 per share in the capital of the Company prior to the signing of the Subscription Agreements.

The estimated net proceeds from the Proposed Subscription, after deducting estimated fees and expenses in relation to the Proposed Subscription (including listing and application fees, professional fees and other miscellaneous expenses of approximately S$150,000), is approximately S$4,444,595 (the “Net Proceeds”).

https://links.sgx.com/FileOpen/Trendline...eID=808849

[Shiyi]

In the same company of AddValue, it keeps issuing shares at lowering prices. Sadly, the money raised seems to have gone to meeting the operating expenditure, not for growth investment.