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Magnis Energy (ASX:MNS) — who owns a majority stake in aspiring lithium battery manufacturer iM3NY in New York — said it received a $25 million binding funding proposal from SBC Global Investment Fund.

The agreement leaves open a provision of a further $25 million.

The funding arrangement is structured as an ‘equity-linked pre-paid share subscription facility’.

What does this actually mean?

Magnis explained:

“The Funding Proposal is expected to be structured as an equity-linked pre-paid share subscription agreement. This means that (subject to the entry into long-form transaction documentation for the Pre-Payment Subscription Facility), SBC will provide to the Company (in the form of a “pre-payment”) an initial A$25 million (but potentially, up to a total of A$50 million) in consideration for the future issue to SBC of the relevant number of new ordinary shares in Magnis. The subscription price for the new Magnis shares the subject of that potential future issue will be based on a 7.5% discount to a future observable VWAP for the Company’s shares on ASX.”

Importantly, this funding arrangement involves a repayment component on the part of Magnis:

“Other than in relation to the 40,000,000 new shares to be issued to SBC following the receipt by the Company of the first A$25 million pre-payment (with the issue of these new shares subsequently being either set-off against future required issues of new shares under the facility or paid for by SBC on the Maturity Date (as defined in the Schedule)), the total amount actually pre-paid by SBC under the Pre-Payment Subscription Facility will need to be either repaid by the Company on the Maturity Date or will need to be satisfied before the Maturity Date by the issue of new shares in Magnis at the Subscription Price. The timing for all future issuances is at the discretion of SBC.”

Magnis’s executive chairman Frank Poullas said the funds will go towards strengthening the company’s balance sheet as well as accelerating development of key projects:

“Magnis is delighted to announce the Funding Proposal from SBC Global Investment Partners, which is expected to strengthen the Company’s balance sheet and place it in a strong position to accelerate development of its vertically integrated AAM business. This includes front end engineering and design studies at its upstream Nachu Graphite Project in Tanzania, engineering and feasibility studies at its downstream AAM Project in the U.S., as well as plant productivity enhancements and additional working capital for iM3NY to meet increasing customer demand.”

This isn’t the first time Magnis has transacted with SBC.

Magnis entered a pre-payment share subscription facility agreement with SBC before, in August 2021.

Life360’s hardware business continues to be a drag on Life360’s margins.

In CY22, the company’s hardware revenue was US$47.9 million while the direct costs of hardware revenue alone were US$45.4 million.

That’s an operating margin of around 5%.

What is lacks in margin is unlikely to be offset by scale.

Life360 expects hardware revenue growth of between nil and 5% in CY23, reflecting the ‘continuing current challenges in the category’.

CEO Chris Hulls commented:

“Tile’s Q4 hardware unit sales delivered a seasonal uplift, however continued to be impacted by headwinds in the U.S. consumer electronics markets. Retailers adopted a very cautious approach, resulting in much lower inventory in retail channels. We also saw aggressive competition from Apple, which is nonetheless driving the category forward. While hardware sales were below previous expectations, we have taken a prudent approach to managing hardware inventory, limiting the impact on our Adjusted EBITDA and operating cash flow. While we are excited about the potential for long-term category growth, Tile’s primary strategic value remains the opportunity to drive subscription revenue.”

Family safety platform Life360 (ASX:360) reported CY22 revenue of $228.4 million, a year on year increase of 103%. This was in line with the company’s guidance.

However, the CY22 net loss widened to $91.6 million, with Life360 ending the year with cash and restricted cash of $90.4 million.

The loss comes despite 360 implementing price hikes for its tiered membership services in November 2022.

On those hikes, CEO Chris Hulls said:

“The churn impact from the November 2022 iOS price increase performed better than expected, showcasing our strong value proposition, as well as the loyalty and engagement of our member base. We are back to subscriber growth in the U.S. in January and February, and International subscriber trends remain very strong. Tile Membership bundling has launched and is scaling up over the course of March as we optimize the user experience. The early signals are positive, and we are excited about the opportunity to improve paid user conversion and retention, and deploy upsell strategies over the longer term following encouraging results from our ‘Gift with Membership’ trials in CY22.”

Source: Life360

While there was a lot of hype last year on how the China reopening story could bring a commodities boom, things haven’t really panned out…yet.

I think some of the recession fears for China may be overblown, and China’s demand could resurface later this year.

As we all know, it takes a while to reopen an economy after a three-year halt. So, we could very well see an uptick in commodities later this year.

And the energy transition continues to tick on.

Overnight, the EU released its Net-Zero Industry Act — a proposal looking to boost its clean energy manufacturing and compete with US’s Inflation Reduction Act to retain industries.

While the EU is looking to source more critical minerals locally, the Act also looks at diversifying its supply chain through strategic partnerships and trade agreements, which could be good news for Aussie miners.

All in all, the story for critical minerals hasn’t changed long term.

https://www.moneymorning.com.au/20230317/the-silent-boom-for-2023-is.html

ICYMI: On Wednesday, I hosted a livestreamed discussion with Fat Tail’s editorial director Greg Canavan and Exponential Stock Investor‘s editor Ryan Dinse about the recent upheaval stirred by the collapse of Silicon Valley Bank.

The discussion focused on the significance of recent events, particularly their implications for Aussie investors.

If that sounds interesting, you can watch it below!

Back to the ASX for a minute.

Yesterday, once high-flying fintech IOUpay (ASX:IOU) requested a voluntary suspension after the IOU board ‘discovered a significant fraud conducted by the former CFO’.

IOUpay is conducting a fraud investigation and is also holding talks with its financiers.

 

The Fed likes to reiterate its dual mandate — to promote maximum employment and stable prices. The latter mandate has led the Fed on a course of monetary tightening over the past 12 months to curb inflation.

Promoting the health of the banking sector is not strictly part of that mandate yet the recent turmoil engulfing US banks has put the central bank in a tough position.

Emergency funding facilities announced by the Fed have already undone in a week half of its balance sheet shrinkage over the past year.

Half of the Fed @federalreserve balance sheet shrinkage (QT) over the past year undone in a week pic.twitter.com/65TSNmbS53

— Noah Williams (@Bellmanequation) March 16, 2023

Here is another chart highlighting the same point — the weekly change in the Fed’s balance sheet:

Source: Bloomberg

Will the banking crisis stall the Fed’s progress against inflation?

Is banking stability a competing priority to curbing inflation? Or can the Fed achieve both?

Economist Justin Wolfers thinks the Fed has the tools to achieve both priorities at the same time.

By this view, the Fed/ECB can (and largely has) addressed bank runs and concerns about financial instability by providing liquidity.

And that leaves interest rates free to target macroeconomic concerns, like high inflation.

Two tools, two targets. No reason to miss on either. pic.twitter.com/umoQ7oTm9f

— Justin Wolfers (@JustinWolfers) March 16, 2023

 

Here is the most telling chart you’ll see today.

US banks have together borrowed US$164.8 billion from two US Fed backstop facilities in the last week alone!

The latest release from the Fed relating to its balance sheet indicated US banks borrowed north of US$150 billion from the ‘discount window’ — a long-standing liquidity backstop for the sector — in the week ended March 15.

Here’s the kicker. This borrowing was up from just US$4.6 billion the week prior.

And here’s a second kicker. The prior record for the amount banks borrowed using the discount window was US$111 billion — during the 2008 financial crisis.

The banks also made use of the newly announced Bank Term Funding Program, availing themselves of a further US$11.9 billion for emergency funding.

How’s that for quantitative tightening?

Half of the Fed @federalreserve balance sheet shrinkage (QT) over the past year undone in a week pic.twitter.com/65TSNmbS53

— Noah Williams (@Bellmanequation) March 16, 2023

Good morning.

How is everyone’s sleep?

For a news junkie, the last few weeks have offered no respite. Breaking news seems to be dropping every hour, any hour.

Silicon Valley Bank, Signature Bank, First Republic Bank, Credit Suisse …

Not to mention the European Central Bank just went ahead with a 50 basis point rate hike despite markets shaving their bets to a 25 basis point hike.

Oh, and the US Fed is set to meet next week as it ramps up financial support to preserve the stability of the US banking sector.

Keeping up with all the recent events of the past fortnight feels like this sometimes: