As he reflected on his time running DVD rental business LoveFilm, retail veteran Mark Livingstone declared: “I fundamentally believe that it is right for a company to have a change of leader as it progresses . . . I’m not afraid to accept that whatever business I run may well have a best-by date for my skillset.”
It is a judgment the listed tech minnow Nanoco would be wise to heed.
The Manchester-based company, valued at £31.5m, makes non-toxic quantum dots — specks of material that emit light. They can be used to create razor-sharp displays on televisions and mobile phones, or help plants grow in poor light.
Hopes that Nanoco could become a cog in tech supply chains made it a closely watched stock after it listed on AIM, London’s junior market, in 2009, transferring to the main market six years later. That enthusiasm has faded. Its key American partner — understood to be iPhone-maker Apple — stalled on renewing its contract in June, causing the shares to plunge 77% to 8.5p. They have barely recovered since.
It is painful stuff for Michael Edelman, Nanoco’s chief executive, who was paid £312,000 last year with the potential to earn up to £1.3m this year. Edelman has made progress during his 15 years in charge. He spearheaded its initial fundraising, spun it out from Manchester University and helped create a manufacturing plant that produces red and green quantum dots at scale.
That has not been enough to satisfy the market, though. Between 2009 and June this year, Edelman has overseen a total shareholder return of minus 15%. Meanwhile, he sold 2m shares for £900,000 in May to repay a personal loan. That reduced his stake by half. He has bought back in since, but at a lower level, picking up 198,000 shares at an average 12.7p in June.
All this does not mean that Nanoco is without promise.
The quantum dots market is poised to grow from $2bn in 2017 to $8.5bn by 2023, and Nanoco’s sales are expected to have more than doubled to £6.7m when it reports full-year results on October 16; pre-tax losses are set to have narrowed from £7.1m to £4.8m.
Analysts at the investment research house Edison said the contract loss was a “major blow” to the company, but stressed that it remained the biggest holder of intellectual property (IP) in its field, with 750 patents.
With commercial opportunities not being fully grasped, though, and investors far from convinced, Nanoco needs a new direction. Until the board is brave enough to shake up the management team, it remains a risky bet. Avoid.
