Tern PLC (AIM:TERN) dropped 23% as it revealed the value of its holding in cyber security business Device Authority has fallen substantially.
Device Authority is raising US$7 million in a two-tranche fundraiser with Tern not putting in any new money but converting its loan notes. worth US$1 million with interest. into equity.
Short-term loans of US$175,000 will also be repaid.
After the second tranche, Tern's stake will drop to around 30% valued at roughly US$7.4 million (£5.9 million), with Device Authority worth US$21.7 million in total.
In June, Tern’s 54% stake had a book value of £11.9 million.
Ian Ritchie, Tern chairman, said: "Whilst the valuation of the Device Authority fundraising reflects the current venture capital market conditions, importantly we believe that it will provide the growth platform that will enable a premium valuation on exit and a substantially greater return for Tern's shareholders in the future.
“Cyber security is essential for global commerce and the completion of the total series B type funding will give Device Authority a sufficient runway to achieve its potential during 2024 and beyond.”
Shares in Tern shed 1p to 3.25p