Locate Technologies Limited (LOC.NZ) Earnings Call Transcript & Summary

Good afternoon, everyone, and thanks for joining us for today's webinar on such short notice. My name is Georgia Katos, and I'm from the Investor Relations team here at Locate Technologies. And I'm really excited to be introducing today's update. As you might have seen this morning, we announced our intention to move from the ASX to the New Zealand Exchange. It's a big step that ties directly into our Bitcoin Treasury Strategy and our long-term vision to create value for our shareholders. Our CEO, Steve Orenstein, is actually joining us in transit to the U.K., and we'll be providing an update and answering any questions you may have. Over to you, Steve.

Thanks, Georgia, and thanks, everyone, for joining in such short notice. Hopefully, my Internet connection survives this webinar. We certainly wanted to be -- I certainly wanted to be in Sydney when we were making this announcement. But unfortunately, through some of the logistical processes in this announcement being approved, it happened this morning. So just to give a run a bit of an update. Obviously, since we originally announced our Bitcoin Treasury Strategy when we -- just confirming everyone can hear me okay. That's alright. When we announced our sort of original strategy to, be able to raise some capital and then purchase Bitcoin, we had the intention to be able to continuously be able to purchase Bitcoin in line with our strategy. Unfortunately, we came up against some regulatory hurdles, particularly with the ASX and around some of the ASX rules and the interpretation of those rules. In particular, one of the rules that had a limiting factor for us was the cash box rule. The cash box rule is on the ASX. And I'll talk in broad terms. There's obviously more specifics that are available online. But essentially, the cash box rule means that a company that has more than 50% of its assets sitting in cash or cash alike is in breach of this particular rule. And so, the ASX made us aware of this rule. We weren't in breach of that rule, but we were getting very, very close to hitting that particular rule. And so, the interpretation from the ASX was that Bitcoin was considered as cash alike. And therefore, if we wanted to continue our strategy, then we would be breaching that particular rule. So we've been busily working over the last few months in discussions with our legal advisers as well as the ASX and also considering what our alternatives are because we really wanted to, as a company and as the Board, execute on this Bitcoin Treasury playbook along with our existing business. And so, we went to market looking around the world at a number of different exchanges. And we spoke with the NZX and saw that they were very forward-looking, had a great understanding of Bitcoin and were very open to us joining their exchange. So we've -- we started that process in moving to the NZX. It's still subject to their regulatory approval, which we hope that we will receive in the coming weeks ahead. It's expected subject to their approvals that will be listed in New Zealand come early October. And in terms of what this means for existing shareholders, there will be a bit of a process that we will go through. The process will be -- is called a scheme of arrangements. What this means is that the -- each investor will have the ability to vote on the scheme, and it will require a majority of investors to vote in favor of this scheme. And what this will mean is that anyone that has a share in the Australian listed company in the ASX will have their share at the same value or the same number of shares in the NZ company. And so essentially, your share from Australia will transfer into New Zealand shares in broad terms. And there's obviously a very lengthy legal document that has been provided today, and there will be further legal documents provided and announced in the coming months ahead. This process will take some time. And so it's likely it will be completed towards the end of November, early December. When -- as part of this process, we need to go to court. We have to explain to the court as to why we're doing this process. The court will ask us to then go and get shareholders to sign off on this process. Once we have had the shareholders agree to this process, we go back to court for the final sign-off. And once that process is completed, then everyone shares will be transferred into the New Zealand entities and we'll really be able to trade. During this time period, the ASX shares will continue to trade and as per normal, and we don't expect that there will be any period of downturn during this -- like whether we are trading hold or suspension during this time period. In terms of when we list in New Zealand, one of the things that sort of I was looking for is when we're speaking to our legal advisers is, how can we do this and how can we start being able to buy Bitcoin as quickly as possible. And one of those things was around having our IPO as early as possible in New Zealand. And so the expectation is that we will list into New Zealand early October. We will raise a small amount of money, about $1 million at that listing, which will be available to all existing investors. And once the scheme completes, then all the investors that are sitting in the ASX vehicle will be transferred across to the New Zealand entity. And so in the New Zealand business, once it has listed, then that will allow us to then continue to be able to buy Bitcoin on an ongoing basis, and we'll be able to -- we're expecting to be able to use our ATM facility in the same way that we've been operating in the Australian market and the New Zealand market. And so yes, it's -- I guess, I'm sure a lot of investors over the next week will have some questions as you do process this. And we're very happy to answer any of those questions and have further follow-up live sessions regarding it. Yes, what I am very excited about is that New Zealand is very keen to have us, and we're very excited to be working with them. We've been a pleasure to do with to date, and we're really excited about this move to be able to continue running our software business, but also continue our Bitcoin Treasury business. Michael, have I forgotten something that's important that you think I could have discussed?

No, no, that's all good. I think, as part of the scheme book that we'll be getting an independent expert to consider the merits of the scheme and to determine whether the scheme is in the best interest of shareholders. So that will be part of the documentation that will be sent to investors.

And so there is on the locate.tech website, there is an updated FAQ that's available when you go to the front page. And that answers what we expect the majority of questions. And as we see more questions coming in, we'll be updating that FAQ. But definitely, we'll be keeping investors up to date a lot over this time period as we make this transition. In terms of how do your shares get transferred, we'll be giving some more detailed information about that. There are a number of different brokers that allow you to trade on the NZX, as an NZX company and having that as our primary listing. It also gives us the option to dual list on to other exchanges across the world. And so, we will be looking at a dual listing into European markets, U.S. markets and also back in the Australian markets. But New Zealand will be our primary listing location. I can see -- if there's any questions there, I'm happy to take any questions.

Yes, there's a couple of questions that have come in, Steve. So the first one is what will happen to the Locate2u software and business?

Yes. So nothing changes. We -- exact same management team. We -- and the business continues as normal. We're still actively growing our business. In fact, today, I saw there was a customer that came in from Germany, so that's our first, I believe, German customer, which is great. So we're continuing to actively grow the Locate2u products and since we've been new business, so that doesn't change. I think, it's a really important thing for us is, that we see our software business growing into the future and to become profitable. And those profits will then we expect to be used to purchasing more Bitcoin into the future.

Thanks, Steve. Are there any tax benefits from NZX listing as opposed to the ASX listing?

Yes. Look, there's definitely some advantages for local New Zealand residents. And so I would suggest if you're a New Zealand resident and you're thinking about getting Bitcoin in terms of a direct Bitcoin investment in your portfolio, you should get some tax advice around what are the benefits of owning our stock versus buying Bitcoin directly. But also, if you're a New Zealand resident and thinking about investing in a Bitcoin Treasury business overseas, there's definitely some advantages in buying our local stock than buying the overseas competitors -- overseas Bitcoin Treasury businesses like Strategy and Metaplanet, et cetera.

Anticipated IPO price in NZ.

We'll update the market on that in the weeks ahead, but that hasn't been set at this stage. And all the details relating to the listing date and the PDS and documentation available to that will be made available to existing investors.

What's the impact of Australian franking credit rules?

We currently don't provide a dividend. And so I don't have a specific answer for that. Michael, we've got an answer.

The only other thing I'd add is, well, we're close to profitability, but we're not there yet. And also -- we have a lot of tax losses to use up before we actually start paying tax on our profits. So any dividend is probably a little bit of a way off at the moment.

Correct. Correct.

Question -- another question, wouldn't this affect Digital X as well, i.e., the ASX cash box rule?

That is a good question. I'm not going to comment, I guess, specifically around a specific ASX business that's trying to do the strategy. But in my experience and what I know and spend a lot of time looking at this, I think it's very difficult for an ASX-listed business to be able to do this. And so every business is different, and that question is best asked to them directly.

Thanks, Steve. I think, that probably answers the next question around why are there other Bitcoin Treasury companies on the ASX if the same strategy can't be pursued by us?

Yes. And I think you'll see a lot of these companies have stopped buying Bitcoin and haven't announced it or have announced it and they've been hit with a whole series of questions. The ASX recently at the end of August, released some additional guidance around that. And yes, you just can go to the ASX website and look at the most recent updated guidance.

That is actually all the questions as of now.

Perfect. I'll just hold 30 seconds and see if there's another question that comes in. But yes, look, we intend to update investors. One of the difficult things that was throughout this process is our ability to actually provide updates to investors, which was extremely disappointing and frustrating for us internally and being able to do that. And so we think once in a New Zealand environment, we will be in a much better position to be able to provide much more detailed updates than what we've been able to previously be able to do.

A couple of questions have just come in. Are there any treasury companies on the NZX already?

No, there's not.

Any concerns about moving to a lower profile, less liquid exchange?

No, I don't have any concerns about that. I think, when we saw sort of our strategy sort of kicked off, there was a lot of interest from overseas investors that were investing in our stock. In -- particularly in our top 20, it's turned over a little bit. And there's been a number of overseas investors who understand Bitcoin, but also understand Bitcoin Treasury playbook extremely well and joined the register. And so, I imagine that would be the same as we move into New Zealand. But I also think what will happen is New Zealand residents will start to see what we are doing and start thinking about trying to ask the question is, what is Bitcoin, and does it make sense to have an allocation in their portfolio. And we will provide a very easy vehicle for those New Zealand residents to be able to get access to having Bitcoin inside of their portfolio. And so yes, I think while it is a smaller market, once we are dual listed into other markets as well, it gives us access to other capital across the world.

Do you expect the global Bitcoin ecosystem to understand the value in this move?

I think so. I think ultimately, a lot of the Bitcoiners that joined the register, I think, have been quite frustrated over the last few months, because we've seen a number of messages around people suggesting, do we understand that we have to buy more Bitcoin. And obviously, I was reading those and in enormous frustration in that, we desperately wanted to and -- but we weren't able to. And so I think what investors will see now is that we're actually able to execute on the strategy that we've planned and be able to be in a consistent basis in being able to buy Bitcoin.

Will new NZ investors get to participate in the NZX listing?

Yes, definitely. So this will be a public PDS that will be made available. And so we'll only be looking to raise $1 million at the initial IPO, but then we'll be able to -- anyone else be able to participate in market.

Is the ASX the only exchange that has these regulations on BT companies?

So this isn't necessarily a rule specifically around Bitcoin Treasury businesses. This is a rule that I believe has been in the ASX since the 1980s. And so it's specifically this cash box rule. There are some other rules that the ASX does have that potentially may implicate a company trying to do a Bitcoin treasury business. But ultimately, this cash box rule is the real rule that sort of, once I was made aware of the interpretation of that, I saw was the complete roadblock for a business trying to do this. And so the cash box rule, I don't know -- I haven't seen that exist in other exchanges. I think this was initially designed probably to stop SPACs occurring in the Australian market. And so yes, it's been there for a number of years. It wasn't necessarily intended to stop the company from acquiring large amounts of Bitcoin, but has definitely stopped us from being able to do that.

I think you touched on this one earlier, but will you dual list with the ASX? Or is that not possible?

At this stage, we will need to make an application to any exchange around the world that we're wanting to dual list on. So we will definitely consider a dual listing into other markets, including the ASX, but also looking at markets like Frankfurt, OTC into the U.S. and others. And I think what we're definitely seeing is, there's a global opportunity and investors are looking to get access to Bitcoin Treasury businesses in other markets outside of their own market. And so making it as accessible as possible for those investors is very important.

Will existing investors be able to participate in the NZ IPO to the extent that they don't get diluted?

Yes, correct. So we will make that available. So it's only $1 million raise. And so we will look to evenly distribute that to existing investors. And so, if there will be further correspondence coming out in the weeks ahead with the ability to complete an application form, that we will have to move to a new share registry. Atomic, we currently use, don't operate in the New Zealand market at this point. And so there will be a process to be able to do that, but we'll be updating the market in the weeks ahead.

If I buy LSE on the ASX today, what will happen to my newly acquired shares on the transfer to the NZX? What is the cutoff date to buying shares on the ASX?

Yes. So we will update the market. Anyone that buy shares on the ASX, they will be transferred to the NZX. And so there will be a point in time, I suspect likely on a Friday, where we will close at the market at 4:00 p.m. Those shares that have been traded up until that period of time will be transferred on the Monday. We would expect that they will start trading in the NZX. And so, we will highly likely be trading in New Zealand as an NZX company in October. All the Australian shares won't be transferred at that point, because the scheme was completed. But once the scheme has completed, they will just be transferred across.

I have a couple more questions, Steve. Does it make sense to raise more than $1 million as part of the NZ IPO if there are no restrictions on the BTC treasury strategy and the forward-looking price of BTC is favorable?

Yes. Look, it's definitely something we considered. We just want to make sure that we do that at a price that doesn't result in large dilution for shareholders. And so it will likely be that post IPO that we will be using our ATM facility for future capital raises in the short term.

Will I be able to trade the NZ shares in CommSec?

Different brokers allow you to do different trading. There's -- and so we will provide sort of further information about this. At this stage, I believe CMC Markets is one broker that does allow you to, but also Sharesy, which is another platform that operates both in the New Zealand and also Australian market. And definitely, I've had some -- a number of conversations with Sharesy, and we're going to make -- if you're a registered customer of Sharesy, we'll make that transfer really simple, but we'll provide further updates on that in the weeks ahead.

Will LOC be added to any indexes on the NZX?

In New Zealand, there's about 130 companies that are currently listed. I think the first -- to join the first index, I believe it's about a $200 million market cap. So not initially, but definitely, that's -- I think one of the positive things is, there's a smaller number of companies we will be known in the New Zealand market. You can already see today, there's some media that has picked us up in the early stages of what's happening. There will be a proper IPO process and announcement. There'll be ringing the bell ceremony in New Zealand on listing. So yes, I expect that the company will grow and definitely, our hope is that we join an index as soon as we can.

Thanks, Steve. No more questions, but where are you headed? It looks like you're at the airport.

That's right. So I'm currently in Abu Dhabi, midway to the U.K. and spending some time in the U.K. meeting some investors there and also then heading on to New York next week, where I'll meet with some other investors or potential investors, but also going to a Bitcoin treasury conference. So I think a lot of the Bitcoin Treasury businesses, the management team that are going to be at this conference, it will be a great opportunity to meet with them to understand what things that have worked and what hasn't worked inside of the building of their treasury businesses. But yes, we're very committed to the strategy and looking forward to the weeks ahead and being able to be listed in the NZX.

Great. Fighting times ahead. Is there anything else you wanted to add to conclude today's webinar?

I think, that's probably given everyone a lot of information. I'm sure that there will be further questions from investors. And so feel free, if you're an investor, you do have questions to e-mail us, [email protected] or if you want to reach out to me directly, you can reach out to me at [email protected] as well. But yes, we'll be very transparent with our investors and keeping you up to date as this process moves forward. If you haven't already, make sure that your contact details, your e-mail address is registered with Atomic, and if you don't have your log-in details with Atomic, you should do that because that's where a lot of the announcements, but also being able to vote on the scheme. And so it's going to be important that we do get investors to vote in a positive way for the scheme to take place. And that's the initial...

I was just going to say your point before about getting some brokers to contact our investors will be much easily facilitated if people have registered their e-mail address. So everyone to do that, please.

Yes. So there's still -- of our investors, there's still a large percentage that haven't registered their e-mail addresses. And so it will be really good if you can register your e-mails, you're going to get a lot more information, and it's going to make it much easier for you to be able to vote on the scheme. Well, thanks, everyone. I appreciate everyone's time and joining today at such short notice, and we'll be updating you in the notes ahead.

Thanks, Steve. Thanks, Georgia.

Thanks, everyone.

Thanks, everyone.