SQN Sends Letter to Bigtincan Board Objecting to Rumored Capital Raise


REDWOOD CITY, Calif.–()–SQN Investors LP (“SQN” or “we”), the investment manager of the SQN Investors Masters Fund LP, the largest shareholder of Bigtincan Holdings Limited (the “Company” or “BTH”) (ASX:BTH), today sent a letter to the BTH Board of Directors (“Board”) expressing our objection to the potentially dilutive and value-destructive “$30M raise for acquisitions” foreshadowed by its trading halt and rumored in this Australian Financial Review article:

https://www.afr.com/street-talk/bigtincan-readies-30m-equity-raise-for-acquisitions-amid-sqn-s-bid-20221206-p5c44p.

We believe such a transaction would obscure the Company’s organic growth challenges and would be a poor use of capital.

SQN also confirmed that it sent a letter to the Company on November 6, 2022, offering to acquire all of BTH’s outstanding ordinary shares for A$0.80 per share in cash by way of scheme of arrangement (“SQN Proposal”), which was made public by BTH via an ASX announcement released on December 1, 2022.

Several material components of SQN’s non-binding indicative offer (NBIO) were omitted by BTH in its disclosure, including:

  • SQN’s belief that BTH can better unlock its potential as a private business due to a variety of operational and capital market related challenges ahead of BTH, all of which have been shared with the Board of Directors on numerous occasions;
  • At the time the SQN Proposal was made, the offer represented a 46% premium over BTH’s 30-day average price of A$0.55 as of November 4, 2022 (the last trading day prior to the issue of the NBIO). Given the illiquidity of the stock, we believe this is the right metric to focus on versus the spot premium on any single day, and fairly values the Company and its long-term prospects;
  • SQN has responded to all of the BTH Independent Board Committee’s (“BTH IBC”) requests for further information in relation to the SQN Proposal over the past four weeks, including in relation to its funding. At this time, SQN has not been given any feedback nor been provided access to Company information for the purpose of progressing the SQN Proposal with its capital partners;
  • Under the terms of the SQN Proposal (and if it proceeds), SQN has committed to support any competing scheme of arrangement or takeover bid (once unconditional) of a higher value and recommended by the BTH IBC should they emerge and that we do not match. This would effectively set a floor value of A$0.80 per share and ensure shareholder value was maximized in all scenarios; and
  • SQN is open to other shareholders rolling a portion of their holdings into the SQN bid vehicle if the BTH IBC determines that would be an attractive feature for BTH shareholders.

The full text of the letter sent to BTH’s Board on December 7, 2022, follows.

December 7, 2022

Dear Board of Directors of Bigtincan (“BTH”),

As the largest shareholder of BTH, SQN Investors Masters Fund LP has endeavored to assist BTH with its various strategic priorities in 2021 and 2022, including leading the financing for the Brainshark acquisition.

We were highly disappointed to read this in the Australian Financial Review about a potentially highly dilutive capital raise:

https://www.afr.com/street-talk/bigtincan-readies-30m-equity-raise-for-acquisitions-amid-sqn-s-bid-20221206-p5c44p

BTH’s decision to pursue this would seem hasty and value-destructive following your receipt of our bona fide acquisition proposal that would offer the Company and its shareholders a significant all-cash premium. We strongly object to this proposed transaction and obviously will not participate in it if it materializes.

Our goal remains the same: to maximize value for all BTH’s shareholders. That outcome, we passionately believe, is to go private today. This is why we have both made an offer for the Company and committed to supporting higher bids should they emerge and that we do not match. We have shared our rationale for our thinking with the Board in several documents that are based on publicly available information, findings which we are happy to share with interested parties.

To be clear, the Company is on record with its CEO, David Keane, stating on July 27, 2022 that “the company is well funded with its cash balance. Given the cash flow discussion we’ve had today, the company is not looking to make any new capital raising activities, and there are no acquisitions currently planned.” This disclosure is one that we and likely other shareholders have relied upon when making investment decisions.

The Company’s about-face would raise significant corporate governance concerns and undermine the credibility of past statements made by the Company. On December 1, 2022, the Company announced on the ASX that in addition to SQN’s proposal it “had preliminary discussions with other interested parties who have approached Bigtincan with indications of interest in respect of a potential control transaction.”

And then suddenly you would choose to embark on this potentially dilutive and speculative capital raise?

We would urge you to instead honor your fiduciary obligations and engage with the various parties that have approached you about a control transaction, including SQN Investors.

Furthermore, we believe that this capital raise would imply a reliance on further acquisitions to achieve your publicly stated guidance of $137M to $143M in Annualized Recurring Revenue (“ARR”) for FY23. The midpoint of this range represents 17% organic growth, down from what was indicated as combined pro forma growth at scale at the time of the Brainshark acquisition just a year ago, and down materially from over 35% in FY17-20. Towards the end of FY22, the Company completed two acquisitions: StorySlab and Task Exchange, both of which were buried in the Annual Report but for which it never disclosed publicly the quantum of ARR acquired. Yet, you likely counted this ARR towards your $120M in ARR achieved in FY22, thereby obscuring BTH’s true and declining organic growth rate. We have expressed this concern to you repeatedly since the time of these acquisitions and have not received a satisfactory response.

In addition, BTH’s financial profile as a public company is becoming increasingly untenable given its continued cash burn, further underscoring our conviction in why the Company should go private.

We passionately believe that going private and seeking the highest offer you can, now that you have our A$0.80 per share floor price, will be the best path forward to maximize value for all shareholders. Your potential transaction to raise A$30M for speculative acquisitions erodes value and is not in the best interests of shareholders.

We urge you to not pursue any capital raise or do any acquisitions at this time. Instead, we hope you will focus your energy on the various bidders that you disclosed have expressed a desire to acquire BTH.

Regards,

Amish Mehta

Founder and CIO

SQN Investors LP

About SQN Investors LP

SQN Investors LP is a long/short equity investment adviser focused on investments in technology and technology-related (“TMT”) companies. SQN employs a long-term, concentrated, private equity-like approach to investing in the public equity markets. Its core focus is on 1,000 North American technology companies with a market capitalization typically between $300M and $10B. SQN was launched in 2014 and invests capital on behalf of institutions and individual investors.



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