NetScientific PLC (AIM:NSCI) hailed a “pivotal” £1 million investment for 30%-owned portfolio company DeepTech Recycling as it completes a pilot plant and further develops its plastic recycling technology.
The funding round was led by the AIM-listed company’s EMV Capital venture capital subsidiary and was in the form of an advance subscription agreement, where the funds will only be applied for shares in the capital of DeepTech Recycling if the company raises at least £1.5 million (or a lower amount that is agreed between the parties) within six months of the first closing of the fundraising.
DeepTech Recycling is the owner of Recycling Technologies, which it bought out of administration last December.
Recycling Technologies has developed a proprietary technology called RT7000, a process that uses thermal cracking to transform hard-to-recycle plastic waste, including polystyrene, into a synthetic oil that can be sold back to the petrochemicals industry as a chemical feedstock it calls Plaxx to make new plastics.
NetScientific said that since the acquisition, the EMV Capital team has worked closely with DeepTech Recycling to “consolidate assets and IP, embark on further research and development programmes, and start on the commercial roadmap of the business”.
As well as enabling the completion of a development phase for its pilot plant, it said the new cash would also support the development and adaption of DeepTech Recycling’s technology and licensing strategy, and headquarters and core team.
The subscription shares are anticipated to be priced at a 20% discount to the issue price of such £1.5 million fundraising, with an agreed valuation cap of £6 million.
Given the subscription price is not yet known, and no new shares in DeepTech Recycling have yet been issued, following completion of the first closing of the fundraising, the total equity holding of NetScientific in DeepTech Recycling remains at 30%.
The capital under advisory of EMV Capital, which will also charge its customary introductory fees to DeepTech Recycling, has increased by £1 million.
DeepTech Recycling is currently 70% owned by AB Group Limited, a company owned by Melvin Lawson who is a substantial shareholder of NetScientific.
Ilian Iliev, chief executive of NetScientific, and chair and investment director of DeepTech Recycling, said it is a “pivotal fundraising” for DeepTech.
“The company's innovative chemical recycling platform can be integrated and scaled into the existing waste management value chain internationally. It is a balanced approach, addressing the global plastic waste crisis, while recognising the importance of plastic in the modern economy. We look forward to continuing to work with DeepTech Recycling as it actively contributes to a cleaner, more sustainable future.”
He said the structure of the transaction is an example of NetScientific’s capital efficient investment model, as it was able to secure a 30% stake for “nominal value”.
“In turn our subsidiary EMV Capital was able to secure investor support for the company's growth strategy. We look forward to reporting on the company's fundraising programme, and the impact on the net asset value and fair value of our shareholding, upon the company issuing new shares in due course."