Redeye comments on Freemelt’s plan to resolve a SEK100m rights issue, with 90% secured through subscription commitments and guarantee undertakings. While the subscription price has yet to be determined, the size of the rights issue exceeds our expectations, making us adjust our dilution assumptions and valuation.

Freemelt

* Currently not profitable, generating no profits and negative cash flow.
* Lack of recurring revenue, which could impact business stability and predictability.
* Uncertain dependency on key individuals, particularly founders, for patents and technological advancements.
* No outspoken environmental goals, which may be a missed opportunity in an increasingly sustainability-focused market.

* Strong growth potential in the 3D printing market, with ample room for expansion and multiple optionalities for significant future growth.
* Positioned well to capture significant value in the market, with sustainable competitive advantages that could last for decades.
* Products contribute positively to environmental sustainability through reduced waste in 3D printing processes.
* Close relationship with customers ensures development of in-demand products, while maintaining good relationships with employees, customers, and suppliers.

* Operating Margin (EBIT) below 20% and not increasing consistently, indicating potential profitability challenges.
* Negative cash flow trends, with the company likely to raise capital within 12 months and lacking sustainable cash flow positivity.
* Weak dividend performance, with no consistent dividend growth or payments, potentially limiting appeal to income-focused investors.

* High Gross Profit Margin exceeding 40%, indicating strong pricing power and potential for accelerated profits with sales growth.
* Low one-time charges to sales (less than 3% average over five years), suggesting financial transparency and consistent earnings reporting.

* Relatively new CEO (joined in 2022) with less than 10 years of experience in the specific business, potentially limiting deep institutional knowledge.
* Lack of consistent delivery on promises and attractive returns on capital, as these aspects are still to be determined due to the company's early stage.
* Dilution of shareholders through increased share count without corresponding EPS growth.
* Limited management ownership stakes, with board members and management not meeting the criteria for significant personal investment in the company.

* Strong visionary leadership from CEO Daniel, who brings deep industry knowledge and a long-term outlook, particularly in industrializing Freemelt's products.
* Transparent and consistent communication, focusing on long-term business value and ESG benefits of the company's technology.
* Diverse and experienced board of directors, with good representation of women and business-savvy members aligned with the company's strategy.