Federated Wireless announced a $58 million funding round this week and now carries a post-money valuation of more than a quarter of a billion dollars. But not everyone is thrilled with the man at the top of both Federated and its second-largest investor.

Private wireless networks startup Federated and its second-largest investor, Allied Minds, are chaired by Harry Rein. Rein is a career venture capitalist who, incidentally, doesn't mention Federated or Allied Minds in either site's corporate bios. He's listed as the non-executive chairman at Boston-based Allied, which is publicly traded in London, and as the board chairman and industry advisor at Federated.

Not a unicorn

The newly announced financing for Federated was a Series D funding round led by an affiliate of Cerberus Capital Management, L.P., with participation from Rein's Allied Minds and GIC, Singapore's sovereign wealth fund.

According to a Feb. 21 regulatory filing from Allied, Federated's Series D funding "was completed at a post-money valuation of $288 million, up from the Series C post-money valuation of $215 million."

In fact, Allied invested $4.2 million in Federated in November as bridge financing and then converted that investment to more shares following the Series D round, Allied said in a regulatory filing. "As a result, Allied Minds' fully‐diluted ownership of the issued share capital of Federated stands at 24.19%."

While Federated's value is growing, Allied Minds has a market cap of around $60 million and has lost about a third of its value since a year ago. And that's what has Harry Rein on the proverbial hot seat.

Crystal fear

The activist investment firm Crystal Amber Advisors, which owns 18% of Allied Minds, has been calling for Rein to step down and is now asking for a general meeting so it can have shareholders vote on Rein's removal.

Allied's sagging share price is one of Crystal's concerns. The fund also alleges in a recent financial filing that it has had a tough time getting financial updates on Allied's holdings, like Federated.

"In April 2021, at the Capital Markets Day held by Allied Minds, it was disclosed that revenues for 2021 for Federated Wireless were forecast to be $17 million with $35 million to $45 million expected for the year to December 2022," Crystal wrote in its filing. With few updates since, the fund wrote that it "believes that price sensitive information is being withheld."

Contained in Crystal's grievances is another Federated-related item wherein a rouge marketing manager took to the airwaves to exaggerate a startup's revenue prospects:

"In November 2021, Federated Wireless issued a press release stating that revenue growth was four times higher than expected. When Crystal Amber wrote to Harry Rein to seek clarification as to why this information had not been released to market participants, Harry Rein responded: 'A marketing manager at Federated released the initial Federated release without the Board of Federated's knowledge.' The release was subsequently amended to exclude any reference to revenue growth."

Federated Wireless CEO Iyad Tarazi discusses his company's spectrum sharing plans in the CBRS band. (November 2021)

Life goes on (below expectations)

Crystal's Feb. 18 complaint was addressed, in part, in a Feb. 21 regulatory filing from Allied. That filing contained the announcement about Federated's new funding, its valuation and prospects, and Allied offered a brief update of its portfolio.

Allied still didn't provide current revenue numbers for Federated but did admit that its earlier projections were off. "Federated delivered a year of very strong revenue growth in 2021, albeit below the expectations set out at Allied Minds' capital markets presentation in April 2021," a Federated shareholder wrote. "This was due to delayed customer deployment of contracted business that was originally budgeted for the final months of the year. It is anticipated that revenue recognition will occur in 2022."

In a section detailing its strategic goals, Allied noted it hopes to prepare its portfolio companies – like Federated – for a favorable exit in the next two to three years.

Allied Minds also announced that its former executive chairman and current 5.53% shareholder, Mark Pritchard, was joining the firm as a consultant to the board "to help execute its strategy of maximising cash returns to shareholders." [Ed. note: Shouldn't every company have a guy who does that?]

Will the new consultant and some ever-so-slight contrition be enough to calm Crystal Amber? We'll see. Neither Crystal nor Allied Minds replied to emails seeking comment. Federated replied but declined to talk.

For now, Harry Rein remains and, like so many executives in the telecom space, he's probably very eager for the 5G private wireless market to go from long-hyped hope to a real money spinner.

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— Phil Harvey, Editor-in-Chief, Light Reading