AI, AI - What's Going on Here Then?
Chat GPT has taken the world by storm in recent weeks, leaving people the world over both shocked and excited about the uses and prospects of AI technology in equal measure.
The technology is without a doubt mind blowing and its further development and advancement will, we believe, continue to take the world by storm, transforming businesses and industries around the globe along the way.
One such business already making great use of aspects of AI technology is Darktrace Plc, the specialist London listed cyber defence company. However, for all the euphoria surrounding the technology, this hasn’t stretched to the company’s share price, which has lingered steadily downward since its flotation to record lows in recent weeks, helped along by short sellers who spy foul-play, given the company’s main backer and shareholder, the entrepreneur Mike Lynch, remains under a cloud of litigation and fraud claims pertaining to the sale of his other business, Autonomy, to HP where accounting practices and tactics in question there are alleged to have followed over to Darktrace… along with many of the same employees allegedly familiar with the matter.
So just what is going on?
The reality is investors are all in the dark without a trace of actual proof, unless the detailed public rebuttal issued by the company’s chief executive officer this last week to allegations made by the New York based Hedge Fund, Quintessential Capital Management, who are short the company’s stock, is to be fully believed.
Like most things, only time will tell. However, while ever the matter remains unresolved, any substantial and long lasting recovery of the company’s share price - based on its enterprise value - is unlikely to be forthcoming in the short term.
What we do know is that AI is here to stay and clearly the technology is valuable.. beyond belief, with all of the world’s major tech firms from Microsoft to Alphabet, already clambering to get in the lead.
It would seem common sense to us therefore, that any existing AI Intellectual Property (IP) which established or emerging players in the industry can get their hands on will be key to affording these companies the head starts they need and we are all too familiar with lofty
valuations given to technology companies in recent years - whether immediately profit making or not.
In our eyes, therefore, no matter what the position regarding accounting practices at Autonomy, at this stage at least, the bigger picture at Darktrace is the company’s IP value rather than its enterprise value and as an established and proven actively marketed and utilised technology, we believe, at the current share price, Darktrace is significantly undervalued by the market both in the context of technology stock valuations (even following recent industry wide sell off) and more specifically the fast growing nature and value of AI technology and so how long it will remain in the Dark with investors remains to be seen.
Indeed, with one potential suitor in the US based leading private equity company, Thomas Bravo, having already cast their rule over Darktrace in recent times, prior to the spike in central bank interest rates and recent short selling activity, neither would it seem illogical to us for other potential suitors to emerge from the shadows…
We therefore view Darktrace as a high value play which falls within the parameters of our special situations investment category and hold the company’s shares with pleasure.
Samuel S. Green
Britannic Holdings Corporation Limited
The statements provided in this and other posts are not financial advice, nor are they recommendations or solicitations to buy, sell or trade any security, nor are they solicitations of any proxy or vote. The information provided is for general information purposes only and should not be considered financial or investment advice. Trading and investing in securities involves substantial risks and you should consult with a qualified financial professional before making any investment decision.