Addvalue shareholders seek answers on spin-off of unit for Nasdaq listing

[SINGAPORE] Satellite communications provider Addvalue Technologies fielded shareholder questions over financial transparency and the involvement of strategic investors in the proposed spin-off and Nasdaq listing of its wholly owned subsidiary, Addvalue Solutions (AVS).

The clarifications, shared by the company on Friday (Sep 18), come ahead of an extraordinary general meeting (EGM) on Sep 24, where shareholders will vote on the proposed spin-off.

AVS is the unit of Addvalue Tech that deals with the group’s business and commercial activities involving the Inter-Satellite Data Relay System (IDRS). It serves to establish connections between network operators and their space assets.

The proposed spin-off was first announced in April. Addvalue Tech noted that a new entity incorporated as a holding company of AVS will undertake an initial public offering (IPO) of its shares.

Financial reporting concerns

A stated rationale presented in the circular for spinning off the IDRS unit is to eliminate any potential “conglomerate discount,” enabling analysts and investors to independently appraise the group’s distinct operations.

Shareholders questioned whether this objective would truly be met for the parent company.

They pointed out that because the parent group will continue to consolidate the US-listed subsidiary’s financials, evaluating the remaining business could become complicated due to differing accounting standards between the US and Singapore.

Moreover, existing reporting only breaks down revenue by segment – omitting other granular metrics on operational profitability, assets and liabilities for the remaining operations.

In response, Addvalue said “The proposed spin-off is intended to provide greater visibility into the group’s different businesses.

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Following completion, shareholders will continue to receive the group’s consolidated financial statements in accordance with applicable accounting standards.”

Post-listing, it added that it will “consider whether supplemental information on the remaining AVT group would be appropriate and useful,” subject to regulatory requirements, accounting standards, and commercial sensitivities.

Shareholders also inquired about which business segment will record work done for the spin-off group – such as the development of IDRS terminals – in the financials of the remaining AVT Group.

The company clarified that revenue generated by its wholly owned subsidiary Addvalue Innovation will be recorded under the remaining group’s relevant segment. Inter-company transactions will be eliminated upon consolidation.

Strategic investors and offering structure

Shareholders also probed the involvement of the project consultant team engaged for the transaction, specifically questioning their role in identifying strategic partners and how those partners will support future growth.

Addvalue disclosed that it is targeting potential strategic investors with “capabilities or relationships in areas such as commercial space, satellite communications, earth observation, satellite constellations, aerospace, defence, communications technology and related capital markets.”

The board noted that such partners could provide critical industry expertise, commercial networks and support for geographic expansion to sustain the IDRS growth trajectory.

It added that no selection is guaranteed and any partnership must align with long-term shareholder interests.

When asked whether strategic investors would participate in the IPO or receive private share placements post-IPO, Addvalue said that the offer structure, IPO pricing, share volume and total proceeds remain unfinalised.

“These matters will depend on, among other things, market conditions, investor interest, the book-building process and applicable regulatory requirements,” the group said, adding that it cannot confirm strategic partner participation arrangements at this stage.

The proposed spin-off structure will be put to a vote at the Sep 24 EGM.

Addvalue was up 4 per cent at S$0.205 in early trade on Friday.