Tern backs Device Authority with new US$280,000 convertible loan investment
What's the deal? Tern plc, a London-listed investment company focused on early-stage IoT businesses, has put $280,000 into portfolio company Device Authority through new unsecured convertible loan notes. The investment, funded from Tern's recent open offer proceeds, maintains its 25.3% equity stake in Device Authority. The notes carry 8% annual interest with conversion terms tied to a future change of control, qualifying fundraise, or a 2027 maturity date.
The loan forms part of a broader convertible loan note round of up to $1.6M designed to give Device Authority the working capital it needs to service anticipated contracts and grow its IoT security business.
Why now? Device Authority specialises in automated identity and access management for connected devices through its KeyScaler platform, targeting automotive, medical, and industrial markets. Tern says the company has "significant contracts" in the pipeline that require working capital support now.
Tern also noted that Device Authority's current performance and prospects are better than its most recent statutory accounts suggest — which showed net assets of roughly £11.6M and a £1.75M loss.
What could go wrong? Tern's own market cap sits at just £5.53M, and its stock carries a "sell" technical signal. The company has faced sharp revenue contraction, heavy losses, and negative cash flow. Device Authority, meanwhile, is loss-making and reliant on external funding to stay operational.
The convertible loan structure adds complexity. If Device Authority fails to hit a qualifying fundraise or change-of-control event before the 2027 maturity, the conversion terms could prove unfavourable for Tern.
The signal: Device Authority sits at the "early growth" stage according to Dealroom, and its SaaS contracts on AWS Marketplace hint at a cloud-native go-to-market strategy — but the gap between pipeline promise and actual revenue remains wide. Tern's role as a corporate investor rather than a traditional VC means it is unusually exposed to a single portfolio bet, with a market cap of just £5.53M and limited ability to absorb further losses if those "significant contracts" fail to materialise.
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