Kraken Robotics
Pure Play In Unmanned Underwater Vehicle Industry
Below is a guest article from our fellow small-cap investor, Sergio Heiber. In addition to his guest articles with us, Sergio can also be found on Seeking Alpha. Today, Sergio shares with us an article on Kraken Robotics.
Kraken Robotics (KRKNF) (PNG.CA) is an underwater technology company that provides imaging sensors, batteries and subsea robots primarily for the defense and offshore energy industries for applications such as ocean floor mining, searching for military mines, underwater surveys, data collection, and managing ocean infrastructure, such as wind turbines, pipelines, O&G platforms, and fiber cable. Demand for its products and services is being fueled by the military importance of controlling the seas and the vast ocean energy and mineral resources.
Kraken is a first mover in unmanned underwater vehicles ("UUVs") equipped with synthetic aperture sonar ("SAS"). and is the only UUV related pure play that I could find. This is a microcap company that competes against much larger companies but has established a customer base that includes the navies of several NATO nations as well as the largest enterprises serving the military and offshore energy industries. The secret sauce has been breaking the price barrier on SAS coupled with quality products and services.
Kraken has strategically and successfully increased its products and services menu in order to provide customers one stop shopping, has established its competitive advantage, and the recent bought deal financing has boosted its balance sheet in order to compete for entire contracts instead of relying on being a third-party supplier for this same type of contracts.
The Secret Sauce
Kraken was founded by Karl Kenny in 2012 by acquiring R&D developed by a former company that he co-founded, Marport Canada. Mr. Kenny had been successful with a previous exit from a company he founded, Telepix Imaging, which was sold for $100 million, but Marport had a negative outcome.
Marport avoided bankruptcy by being acquired by venture capitalists who sold off the company's assets. Kraken took over the same facility where Marport operated, retained some of the employees and bought the Marport patents for the SAS technology it had developed.
SAS was first invented in the 1950s and offered greater flexibility such as operating in deeper water and increased accuracy, higher resolution and lower power requirements, but its use was limited due to its high cost. Mr. Kenny's plan was to fill the void by developing and commercializing SAS at a historically low price.