29 May 2020

Tech company shareholders frustrated at low value

3:16 pm on 29 May 2020

A group of shareholders in the technology company Rakon are getting impatient with its undervaluation and want directors to put the company on the block.

Mobile phone masts have been damaged in England in recent days (file picture).

Photo: citadelle/123RF

A group representing 14 percent has written to the board asking it to immediately market the company to international investors through a tender, amid reports that some Australian investment funds have been showing interest.

"[We] believe the company is significantly undervalued and the company is failing to highlight this value to outside investors," the letter said.

"Rakon listed to take advantage of the capital markets to grow its business on a global basis, and we believe did not list to languish below asset value as it has done for a considerable period now."

The letter said other companies in the same technology sector enjoyed significantly better valuation ratings than Rakon and that due to a lack of proper engagement, Rakon had been essentially "ex-communicated" by all forms of market commentator and analysts.

"We contend, given the long history of disappointments, it is most unlikely a bumper result from the company's enviable position in the global 5G space will change sentiment (and valuation) to any great degree. Shareholder frustration (and possibly director frustration as well) will continue unless more immediate focus on shareholder value is taken."

It goes on to say the board should immediately initiate a process to market the company to international investors.

"We contend this action will potentially create competitive tension while crystalizing Rakon's true market price for all shareholders to consider."

Chief executive and managing director Brent Robinson agreed the company was undervalued, and that it did not get enough market analysis, but disagreed that 5G would not return results.

"As 5G accelerates, so will Rakon and its financial position will be more attractive."

"Be patient, it's early days for 5G and I believe Rakon's performance should improve a lot, as far as profits are concerned over the next few years."

He said new investors could be something the board looked at later.

"It would be more entertaining down the line than it is now... our view is that we need to keep our head down and produce some results to get some confidence back in the market and that's really what our strategy's been."

The board's chair has said it will consider the matters raised in the letter, but noted neither of the company's two biggest shareholders are backing the idea.