Investment in Device Authority CLNs

Tern invests $104,111 in Device Authority convertible notes with long-dated, contingent upside.

What the company is saying

Tern Plc is announcing a US$104,111 (approximately £78,000) investment in new unsecured convertible loan notes issued by Device Authority Limited, funded from its recent Open Offer. The company emphasizes the convertible note terms: 8% annual interest, conversion on a change of control or a qualifying fundraise of at least US$5 million, or maturity on 30 June 2027. Conversion terms are highlighted: three times face value plus interest on change of control, or a 25% discount to the qualifying fundraise price. Tern states its equity holding in Device Authority remains at approximately 26.6% (pre-option dilution), with a CLN holding of about £0.29 million. The announcement describes Device Authority as a global leader in IoT Identity and Access Management, focusing on the KeyScaler™ platform, but provides no operational or customer metrics. The company notes Device Authority is raising up to US$0.9 million from existing investors on the same terms. Tern explicitly downplays the relevance of Device Authority’s last statutory results, stating those figures do not reflect current performance or prospects.

What the data suggests

The investment amount is US$104,111, part of a broader Device Authority convertible loan note round targeting up to US$0.9 million from existing investors. The notes pay 8% interest and offer conversion at favorable terms only if a change of control or a US$5 million+ fundraise occurs; otherwise, they mature in June 2027. Tern’s equity stake in Device Authority remains at 26.6%, with a new CLN position of approximately £0.29 million. Device Authority’s latest disclosed financials (year ended 31 December 2025) show net assets of £11,609,000 and an annual loss of £1,750,000, with no revenue, EBITDA, or cash flow figures provided. The unaudited book value of Tern’s Device Authority holding as of 30 June 2026 is £4.1 million. No current financial or operational data for Device Authority is disclosed, and Tern asserts the historic figures are not representative of the present. The lack of recent performance metrics, combined with ongoing capital raising, points to continued cash burn and operational risk.

Analysis

The announcement is primarily factual, detailing Tern Plc's investment in Device Authority convertible loan notes, with all key terms and figures disclosed. The only forward-looking claim is Tern's assertion that historic statutory figures do not represent Device Authority's current prospects, but no new operational or financial data is provided to substantiate this. The investment is modest in size but is part of a broader funding round, and the benefits (conversion or upside) are only realised upon a change of control or a significant fundraising event, both of which are uncertain and likely long-term. Device Authority's most recent disclosed financials show a substantial loss, and the company is still reliant on raising further capital, indicating ongoing cash burn. The description of Device Authority as a 'global leader' and the capabilities of its platform are not supported by operational metrics or customer data. Overall, the tone is restrained, but the lack of current performance data and the promotional language around Device Authority's status introduce moderate narrative inflation.

Risk flags

• ●Device Authority’s most recent statutory accounts show a substantial annual loss (£1,750,000 for 2025), indicating ongoing negative profitability and potential cash burn. This raises questions about the company’s ability to achieve self-sustaining operations without further capital.
• ●The investment’s upside is entirely contingent on uncertain future events—a change of control or a qualifying fundraise of at least US$5 million—neither of which has a set timeline or guarantee of occurring. If these triggers are not met, the notes simply mature in June 2027, offering only interest income.
• ●No current operational, revenue, or customer data for Device Authority is disclosed, and Tern explicitly states that historic figures are not representative. This lack of transparency on present performance makes it difficult to assess Device Authority’s growth trajectory or the likelihood of a liquidity event.
• ●Device Authority is in the process of raising up to US$0.9 million from existing investors, signaling ongoing capital needs and possible dilution or further funding rounds if performance does not improve.

Bottom line

Tern’s US$104,111 investment in Device Authority convertible notes is a small but potentially high-upside bet, with returns dependent on a major liquidity event or significant new fundraising at Device Authority. The terms are favorable if such an event occurs, but there is no evidence that either trigger is imminent, and the company’s last reported financials show continued losses and a need for more capital. No current trading, revenue, or customer data is provided, making it difficult to gauge Device Authority’s operational progress or prospects. Investors should recognize that the investment’s payoff is long-dated and highly contingent, with the main near-term benefit being 8% interest. The most important takeaway is that this is a speculative, illiquid position with uncertain timing and outcome, justified only if Device Authority can deliver a step-change in its financial or commercial performance.

Announcement summary

(AIM:TERN) Tern Plc announced an investment of US$104,111 (approximately £78,000) in new unsecured convertible loan notes (Device Authority CLNs) to be issued by Device Authority Limited. The investment will be funded from the proceeds of Tern's recent Open Offer. The Device Authority CLNs carry an interest rate of 8 per cent per annum. The principal amount and accrued interest of the Device Authority CLNs are convertible on either a change of control of Device Authority, or a fundraising of at least US$5 million (a 'Qualifying Fundraise') by Device Authority, or, if neither has occurred, on 30 June 2027. On a change of control, the Device Authority CLNs are convertible at a three times multiple to their face value and the value of accrued interest. On a Qualifying Fundraise, the Device Authority CLNs are convertible at a 25 per cent discount to the Qualifying Fundraise price. If neither a change of control nor a Qualifying Fundraise has taken place, the Device Authority CLNs will mature on 30 June 2027. As at 30 June 2026, Tern’s holding in Device Authority had a total unaudited book value of £4.1 million. Following the issue of the Device Authority CLN, Tern's equity holding in Device Authority will remain unchanged at approximately 26.6% (before any dilution on exercise of share options), and Tern will hold a Device Authority CLN holding of approximately £0.29 million. Device Authority is in the process of raising up to US$0.9 million from existing investors through the issue of Device Authority CLNs on the same terms. Device Authority is described as a global leader in Identity and Access Management (IAM) for the IoT, focused on the automotive, medical device, and industrial sectors. Device Authority's KeyScaler™ platform provides zero touch provisioning and automated lifecycle management for securing IoT devices and data at scale. Based on Device Authority's latest statutory accounts for the year ended 31 December 2025, as at that date it had net assets of approximately £11,609,000 and incurred a loss for the year of approximately £1,750,000. Tern notes that these historic and statutory figures are not considered representative of Device Authority's current business, trading performance, and prospects.

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