What's Cooking at Kymata ?
Shareholders of Scotland’s Kymata Ltd. were today expected to approve changes in the company’s articles of association, which may pave the way for the sale of the startup for a bargain price.
The changes, which were put to a vote at an extraordinary general meeting (EGM) today, give “employee shareholders a preferential right to protect their equivalent percentage shareholding in the business in the event of refinancing, a trade sale, merger, or IPO” says Derek Milne, Kymata’s director of communications.
In simple terms, this means that if the worst happens, employees aren’t going to end up making next to nothing on the Kymata shares they've been given or were encouraged to buy -- which was beginning to seem a distinct possibility, according to rumors surrounding Kymata.
At one stage last year, Kymata was said to be valued at more than $1 billion, but recent rumors suggest that a deal is now in the works under which the company will be sold for stock worth as little as £100 million to £150 million (US$140-$210 million) in the next few weeks.
Under the company's existing articles of association, nearly all of the proceeds of such a sale would have been gobbled up by institutions with “A” class shares, which together have provided a total of £114 million ($160 million) of funding for Kymata. That would have left next to nothing for holders of “O” class shares -- employees and some private shareholders.
The result of the vote at today’s EGM has yet to be announced. But it was a foregone conclusion, according to Milne. He says that Kymata’s institutional investors accept the need to reward employees. They had already sent in proxy votes to the EGM approving the changes to the company’s articles of association. The changes create a new “B” class of shares for employees. On the face of it, this appears to leave the remaining “O” class shareholders out in the cold. These include former employees and some private shareholders, some of whom appear to have been complaining vociferously (and anonymously) to a local newspaper, The Scotsman, in the past few days. The changes appear to be particularly bad news for Brendan Hyland, Kymata’s former CEO, who is said to still own 10 percent of the company in the form of “O” class shares. Hyland, a founder of Kymata, who quit under mysterious circumstances last January (see Kymata CEO to Step Down), may now find that his fabulous fortune has shrunk to a tiny fraction of its former glory.
The upshot of all of this is that the press has been rife with rumors about Kymata for several months, possibly as disgruntled employees, or former employees, or investors have tried to influence affairs.
Light Reading has received its fair share of “hot tips," often suggesting that Kymata was about to be acquired by Alcatel Optronics (Nasdaq: ALAO; Paris: CGO.PA). The putative price has come down steadily, from around $750 million last fall, to $425 million at the beginning of June (see Kymata: For Sale?), to £150 million in a note we received last Friday from someone masquerading as Vivek Tandon, until recently Kymata’s VP of business development.
Light Reading has been unable to substantiate any of the the tips. And Milne says the latest reports of a £100-£150 million sale are equally bogus.
Milne maintains that Kymata isn't desperate for a deal and has sufficient cash to continue “for the foreseeable future." He says the company’s revenues are growing -- 11 major new customers were signed in the past quarter -- so it’s tough to say how long Kymata could continue until it needs another infusion of funds. It’s certainly next year, he contends, and not this.
Milne also rejects reports that Kymata has lost a lot of key staff, noting the company has changed its mix to reflect the fact that it’s now actually selling products and generating revenues. The total number of employees has declined from 450 at the beginning of the year to 400 now, but Kymata is recruiting applications engineers, process engineers, and product management specialists, Milne says, and expects to have 450 on staff again by the end of the year.
— Peter Heywood, Founding Editor, Light Reading