After hours and pre-market activity likely due to the STM event yesterday evening. Short version is STM is building an industry alliance for the development of AR hardware and software platforms (smart glasses like Apple and Google are talking about) and during the event they confirmed that Microvision remains a strong and valued partner and customer. The framework of the alliance appears to rely on several areas of technology that Microvision happens to be the recognized leader in. STM also talked about making investments and having news at their big event in a couple weeks.
The Seeking Alpha article pegging the value of MVIS automotive LiDAR at $2B was likely why we didn't see more of a sell off yesterday during trading hours and closed green, but in the end it was largely an opinion piece with some issues that could be picked at even though the author did a pretty thorough job laying out his case and providing a background on LiDAR overall. Definitely worth reading for the background and understanding where things are heading.
Right now it is looking more likely that the shares authorized yesterday may get issued to facilitate either STM or the new alliance to take a minority stake in MVIS. Best guess would be 50m shares for a $250m which works out to be about $5 per share for a 25%. Potentially VERY good development and provides MVIS with some real benefits.
1. Serious cash infusion -- That is enough money for them to ramp up their development projects that were put on hold, focus on completing auto LiDAR and begin work on next gen near eye display engine. Talk of bankruptcy disappears.
2. Guided product development -- working with the Alliance sets specific development targets. No more "If we build it, they will buy" type mentality that has repeatedly hindered success in the past.
3. Established sales and marketing -- working with companies that have experienced and successful sales organizations and established customer base off loads a portion of what MVIS has traditionally struggled with -- finding new customers -- and lets them focus on what they do well.
4. If you have reliable partners and customers, revenues will increase and stabilize. The alliance is targeting AR wich is projected to be a 96 billion dollar industry over the next 5 years. They were also talking about IoT and automotive LiDAR as being in scope -- both estimated to be in the 100s of billions in the near future.
The picture may not be entirely rosy however, depending on your expectations. I can see a couple scenarios where this type of investment leads to disappointment. First would be if MVIS is locked into supply contracts at unfavorable rates and the expected value doesn't materialize. The other is if the perceived value of ongoing operations and participation in the alliance is higher than the buyout offers they have received and the board decides to just continue operations. Both of these scenarios would probably limit the share price run up to a bit above the premium paid for the minority stake and some calculation of future revenue.
The positive take is that such an investment doesn't necessarily preclude a sale of the company to one of the tech majors. Such an alliance participation may even be viewed as a positive and enhance the value in a sale scenario as the deal would then come with all of the benefits described above.
STM has another multi day event scheduled in a couple weeks and the picture should become much clearer at that point.
It is also interesting that the chairman of the MVIS board made comments indicating that he was excited to talk to the shareholders at the earnings call in late October. In the past the fall earnings call was always November, and since when does the Chairman of the Board speak at these meetings? Something is definitely going on behind the scenes and it sounds like we will know a lot more by the end of the month.
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