Dear Bigtincan Shareholders,
Forager Funds has been an investor in Bigtincan since August 2021. As at the date of this letter, the Forager Australian Shares Fund owns 2.5% of the company. We are extremely frustrated with the performance of the Bigtincan business and our discussions with other institutional investors suggest this frustration is widespread.
Over the past three years we have experienced:
- An 87% fall in the share price, from $1.37 to $0.18;
- Cumulative cash outflows from Bigtincan of $207 million, including operating losses (including tangible and intangible capital expenditure) of $62 million and acquisitions of $144 million;
- Increasingly dilutive capital raises, with shares outstanding rising from 356 million at the end of the 2021 financial year to 822 million as at the date of this letter;
- A bizarre sequence of announced takeover proposals, the first of which was supposedly at $0.80 per share, more than four times the current share price;
- The use of factoring to artificially inflate the company’s reported cash receipts in the 2022 and 2023 financial years;
- A significant decline in organic revenue in the 2024 financial year.
Forager has attempted to engage with Bigtincan’s Chairman Tom Amos and Managing Director David Keane, as well as the wider Bigtincan board over the past 18 months. The message has been the same as for a number of our portfolio investments: the environment for tech companies has changed.
Businesses need to be run in a sustainable, cash generative manner. While many have adjusted their businesses and have seen their share prices react positively, Bigtincan’s management has not heeded this message and seen its share price plummet.
It is our view that the board did not hold management accountable, has not acted early enough to force the required changes, and approved dilutive equity issuances that should not have been necessary.
We are strongly of the view that the Bigtincan board requires turnaround and restructuring skills that it is lacking.
The path to a better future
Our attempts to achieve the necessary change via constructive engagement with the existing Bigtincan board have, unfortunately, failed. Shareholders do, however, have the chance to make the required changes at the upcoming Annual General Meeting (AGM). Here’s how:
- Vote AGAINST the Scheme Transaction with Investcorp
We see no merit in this transaction and made that view clear to the Bigtincan board before they recommended it to shareholders. The company offering to buy our shares in Bigtincan will only have US$12.5m in cash, meaning the vast majority of shareholders will get scrip in Investcorp AI Acquisition Corp, a Nasdaq-listed SPAC, in exchange for their Bigtincan shares. This entity does not own any other businesses. It will be Bigtincan, with all of its existing problems, but listed in the US. For that privilege, the SPAC sponsors will be gifted 25% of our company. We own a lot of US-listed companies in our Forager International Shares Fund. It is our opinion that investors in the US are no more keen on small, lossmaking, shrinking companies than Australian investors.
By voting AGAINST the scheme at the upcoming AGM, shareholders will avoid the US$2.75m in break fees that will be payable if the scheme doesn’t get approved at a future scheme meeting. Approving the actual transaction will require 75% of shareholders to vote in favour, whereas this resolution only requires 50% in favour.
It is our intention to vote AGAINST the Scheme Transaction with Investcorp.
- Vote AGAINST the adoption of the remuneration report (resolution 2)
At last year’s AGM, 78% of shares voted were against the remuneration report. If shareholders vote against it again, it will trigger a spill motion. It is our intention to vote AGAINST the remuneration report.
- Vote FOR the conditional spill resolution (Resolution 3)
Successfully passing the conditional spill resolution will mean the company must convene a “Spill Meeting” within 90 days of the AGM. Existing directors Tom Amos, Wayne Stevenson and Timothy Ebeck would need to stand for re-election.
We are hoping the addition of Tony Toohey and Earl Eddings to the board will mark a significant improvement in Bigtincan’s strategic direction. The spill meeting, 90 days later, will give shareholders a chance to assess their progress and make further board changes at that meeting if required.
It is our intention to vote FOR the conditional spill resolution.
- Vote AGAINST the election of Akash Agarwal (resolution 5)
We don’t know Mr Agarwal. He was previously a director of the company prior to its listing. His endorsement by the existing board and managing director suggests his views align with theirs. Therefore, it is our intention to vote AGAINST his appointment.
- Vote FOR the election of Tony Toohey and Earl Eddings as new directors (resolutions 6 and 7)
Via my private investment vehicle, Senefelder Investments, I have nominated Tony Toohey and Earl Eddings to the Bigtincan board. Without any rationale as to why, existing directors are recommending you vote against their appointment.
It is our intention to vote FOR their appointment and hope other shareholders will do the same.
These two directors are unrelated to Forager. We were, however, substantial shareholders in ASX-listed MSL Solutions where Tony and Earl worked with the board of that company to successfully resurrect its fortunes (see their biographies below). That business shared many similarities with Bigtincan, including a number of large historical acquisitions that had not been well integrated and a valuable revenue stream that was not delivering profits due to an inflated cost base.
The business restructuring undertaken after Tony and Earl were appointed to the board resulted in a successful takeover of MSL Solutions at more than three times the share price when Tony was appointed to the board.
We believe they have the skills and experience to oversee something similar at Bigtincan.
Shareholder value creation
We are of the opinion that the right outcomes at the upcoming AGM can make a material difference for shareholders. Right now, we are unsure whether that should be selling the company or restructuring the business and going it alone. We do know, however, that the best outcomes come from a position of strength. And the only way we can get there is via change at the top.
If you would like to discuss the contents of this letter, please do not hesitate to get in touch with us via admin@foragerfunds.com. You can also register your email address with us here to stay up to date with our campaign between now and the AGM.
Kind regards,
Steve Johnson
Managing Director and Chief Executive Officer, Forager Funds Management
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Nominated director biographies
Tony Toohey
Tony is a highly accomplished senior executive with over 37 years in the gaming, hospitality, leisure and technology industries with a proven track record of success in creating sustainable competitive advantage and a strong platform for continuing growth.
Tony was appointed as an Executive Director and Chairman of MSL Solutions on 1st September 2019 when its share price was $0.07 with a market capitalisation of $17.5m. He held this role until February 2023 when MSL was acquired by Pemba Capital Partners for $0.295 cents per share, or $124m market capitalisation.
Tony is the former Managing Director, CEO & Executive Chairman of ASX listed Intecq/eBet Limited. Intecq/eBet Limited was acquired by Tabcorp in December 2016 for $128 million. Tony served as GM Business Development Gaming Tabcorp from 2016 until July 2018.
Earl Eddings
Currently a Director of E4 Advisory, Earl Eddings was an Independent Non-Executive Director of ASX listed MSL Solutions from April 2019 until its acquisition by Pemba Capital Partners in April 2023.
Earl served as a Chairman and Director of Cricket Australia from 2008-2021. He was a Director of Cricket Victoria from 2006-2015 and held the position of Deputy Chairman from 2008-2015. Earl was also Director of the Kerry Packer Foundation and Director of the International Cricket Council. He is a Fellow of the Governance Institute of Australia and Graduate of the AICD. Previously he was Managing Director for WSP Asia Pacific and Managing Director of ASX-listed Greencap before selling to Wesfarmers.