LONDON (ShareCast) - (Sharecast News) - Tern announced on Friday that it has sought relief from its funding obligations to the Sure Valley Ventures Enterprise Capital Fund after determining it lacked the financial capacity to meet future capital calls, a move that would see the AIM-listed investment company classified as a defaulting investor under the fund's partnership agreement.
The company committed up to £5m to SVV2 in 2022, to be drawn over the fund's 10-year life.

To date, Tern had invested about £1.3m, and its stake in the fund was valued at roughly £0.8m as at 30 June.

However, the board said it no longer had sufficient funds, nor a viable route to raise further capital, to continue meeting capital contributions when required.

Efforts to bolster liquidity had stalled, the board said.

Shareholders declined to approve the disapplication of pre-emption rights at the June annual meeting, preventing the issue of new shares for cash on a non-pre-emptive basis.

An open offer launched in October to raise up to £642,486 produced gross proceeds of only £151,136.

The company said the constraints, despite measures including salary reductions, shareholder engagement and discussions with SVV2 to identify a replacement investor, had left it unable to meet the fund's capital demands.

Under the SVV2 Limited Partnership Agreement, the fund's general partner confirmed that Tern would be treated as a defaulting investor.

Remedies available included forfeiture of existing capital or the compulsory transfer of Tern's interest.

If no other partner assumed its commitment and its paid-in capital was not forfeited, Tern's existing investment would remain in the fund until it ceases, with any residual value returned thereafter.

The firm warned that defaulting status "may reduce Tern's rights to distributions during the life of the fund and could limit Tern's recovery compared to non-defaulting investors."

Tern said it would continue to provide updates as appropriate.

It reiterated that, based on current assumptions and excluding further investment activity, its existing cash runway was expected to extend into the first half of the first quarter of 2026.

The company added that it intended to remain a constructive partner regarding SVV2 investments already funded, and would concentrate on safeguarding shareholder value across its core holdings, Device Authority, FundamentalVR and Talking Medicines.

At 1139 GMT, shares in Tern were down 12.22% at 0.4p.

Reporting by Josh White for Sharecast.com.

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