A rerating in sight with potential Nasdaq listing
A rerating in sight with potential Nasdaq listingM&A /CORP. ACTION
ANALYSIS
Drone Volt has just announced that it plans a NASDAQ listing in a quest to improve its valuation. This would be done with the help of Maxim Group LLC, which would be paid in shares but capped at 4% of capital (of which 3% if the listing is successful).
This additional listing makes strategic sense as the US drone market is the number one in the world and is now free from Chinese competition, which has enabled the company to increase its presence there over the past year. A listing could thus boost its reputation in this crucial market and help improve growth. The company now also has a strong shareholder base in the US, among which its reference shareholder is Armistice Capital.
On top of these points, we agree with the company that innovative start-ups such as Drone Volt, which are not yet profitable, are usually significantly better valued on the NASDAQ than elsewhere. A peer like Aerovironment is valued more than two times higher on a P/B basis, for instance.
We think that it is clever that the company uses its shares rather than its cash to pay the investment bank given that it is not FCF positive yet, although of course it results in a slight dilution of existing shareholders.
The only real potential drawback that we see from this dual listing is a split of liquidity between Euronext Paris and NASDAQ, which could be magnified by the small size of the firm that would put it under the radar.
We thus find the slight positive reaction this morning justified given the rerating potential linked to this potential dual listing and reiterate our positive recommendation which banks on less competitive dual-use technologies.
Drone Volt SA. Drone Volt SA is a France-based company principally engaged in the aerospace industry. The Company provides civilian drone manufacturing. It specializes in the production, integration and sale of drones for professionals. Drone Volt is a provider of the audiovisual market in the field of aerial photography by drone. The Company is also present in many other markets such as security and topography, among others. The Company's main product is the Pack PRO FOR GH4 S900. It cooperates with Ministry of Internal Affaires, Ministry of Defense, CERN, Gendarmerie Transports Aeriens (aerial transport police), Dakar 2015, Spie, TF1, Bouygues, CNRS, Bonne Pioche, RAID and GEDEON Programmes, among others. It operates through Dandrone.
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