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First Derivatives and its “Customer Wins”

By Tom Winnifrith, The Sheriff of AIM | Monday 8 October 2018

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from ShareProphets). I have no business relationship with any company whose stock is mentioned in this article.

While readers reflect upon the various related party transactions undertaken by First Derivatives (FDP) over the years, see HERE and HERE, and in anticipation of  further revelations to come do the smart thing and SELL, it seems an opportune moment to consider more recent “contract wins”.

Red Bull Racing is a customer win announced by First Derivatives just last year, in November 2017. 

First Derivatives announced:

“FD (AIM:FDP.L, ESM:FDP.I) announces that it has been selected by Red Bull Racing as a team supplier for the use of its Kx technology to analyse sensor data from its Formula 1 vehicles. Initially, Kx will be deployed for the analysis of wind tunnel data, a critical element in the development of faster, more competitive F1 cars.

Naturally, no financials were provided regarding the value of this customer win. But that doesn’t deter corporate marketing writers extraordinaire Citi or Goodbody mentioning the contract in their respective marketing to encourage investors to buy the stock.  

Kx Systems, which First Derivatives currently retains a 65% interest in and is expected to increase to 100% by June 2019, says it was selected as an “official team supplier.”See here:

On the basis of this, one would assume that being “selected” would be the consequence of some type of bidding process. However, the privilege of “team supplier” is not doled out for free. In fact, as with other “customer wins” (which will be revealed soon), there is evidence here to suggest that the contractual relationship is reversed. I.e. Rather than First Derivative supplying software is it instead buying visibility?

This question is raised when considering a few other “team supplier” deals signed by Red Bull Racing.

  1. Singha Beer: According to this press release, Singha Beer seems to have paid Red Bull to move “its status from team supplier to team partner, allowing for its logo to appear on the RB6 car and on a range of other team assets throughout the 2010 season.” I.e. Singha Beer paid to get its logo on the car. Obviously, Singha Beer is in the beer supply business and not software market, so as beer supply and fast speed racing isn’t a great match it’s unlikely Singha is a contractual supplier. But the question is, is this sponsorship similar to the First Derivatives arrangement?

  2. GoPro: How about GoPro? Again this has been announced but apparently more in a sponsorship capacity. GoPro states: “As an official Red Bull Racing Team Supplier, GoPro will work together with the team to produce specific F1 content …”

  3. Hisense: Then there’s Hisense which will provide 800 TVs.

  4. Total: Which will make a significant contribution to Red Bull Racing’s fuel and lubricant performance.

    All of the current Red Bull Racing team suppliers can be found here: (select Partners)

    There is basically a similar press release for each one. 

    The point here is that the purpose of the partnership is generally meaningless. Many suppliers have no shame in describing these deals as sponsorships. In fact, the only two that I could find that describe their partnerships as a bona fide customer relationship is First Derivatives and Mitie (of course).  

    This brings us back to the lack of financial details in First Derivatives’ announcement. Maybe they weren’t mentioned because there are none other than a sponsorship arrangement? Hmmm. Keep selling.

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