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Small caps movers: IQE surges as it raises £95mln without having to discount shares

A look back at some of the more interesting stories from the junior market this week...
semiconductor chip
IQE makes silicon wafers for semiconductors

It’s not very often that you see a company on the junior market raise a sizeable chunk of money by issuing shares at the going rate, but that’s exactly what IQE did on Friday.

The semiconductor wafer maker raised a whopping £95mln from investors to help it expand the business and develop its products and technologies.

More impressive was that shares were issued at 140p – the same as Thursday’s closing price – as well as the fact the placing, which was only open to institutional investors, was completed in less than 24 hours.

IQE shares have quadrupled so far in 2017 and they added another 8.9% this week to 162.1p as smaller investors followed the big City boys’ lead.

Another big gainer over the past few days was fibre optic infrastructure developer CityFibre after it unveiled a long-term strategic partnership with telecoms giant Vodafone.

The two firms are joining forces to build a new ultra-fast broadband network for up to 5mln homes and business across the UK.

The fibre-optic FTTP (fibre-to-the-premises) network will be capable of carrying one gigabit (1,000 mbps) of data to the door of the user. To give you an idea of how fast that is, the average download speed in the UK is just over 16mbps.

CityFibre, which joined AIM back in January 2014, will build, own and operate the network with Vodafone having exclusive rights to market ultrafast consumer broadband services for a set period.

In return for that exclusivity Vodafone has agreed to minimum volume commitments, which will largely offset the expected £500-700mln cost of building the network.

Shares surged 40.1% to 61.5p after Thursday’s announcement, which bodes well for star fund manager Neil Woodford who has an 18% stake in CityFibre.

Redx Pharma and Tower Resources were the two big fallers on the junior market this week, although both have just come back from share suspensions which probably explain a lot.

Drug discovery group Redx’s AIM shares started trading again on Monday for the first time since May when it entered administration after a £2mln loan from Liverpool City Council fell due.

It sold off its BTK inhibitors business for US$40mln which allowed it to pay back the money so this week’s 45% fall to 17.4p is the City adjusting for the smaller size of the company.

Tower Resources is a slightly different story as its shares were suspended while it raised money from investors.

Given the backdrop for small oil explorers, the £2.1mln fund raise was no mean feat but the cost was reflected in the heavy discount to the market price when the shares were suspended in May.

With the cash now secured the company can again concentrate on advancing its exploration of the Thali block offshore Thailand.

But the discounted fundraise inevitably weighed on the share price, which more than halved to 0.9p.

It hasn’t been a great week for the juniors or their blue chip cousins as the record-breaking runs seen across the global markets over recent weeks ran out of steam.

The AIM All Share lost 0.5%, or 3.8 points, to close the week at 1,038.4, while the FTSE 100 gave up 1.7%, or 129.9 points, to 7,429.3.

One of those weighing on the AIM index was electronics firm Stadium Group. Investors were quick to head for the exits on Wednesday after it warned full-year profits would miss expectations.

Stadium said revenues were expected to be in line with forecasts at £61mln but due to delays in customer orders for some of its higher margin products, pre-tax profit growth will be in the single digits.

The delayed sales and a shortage of certain components also mean that net debt will increase in the year to 31 December.

The issues don’t seem to be fading away anytime soon either, with Stadium stating that the delays and pricing pressures “will continue to impact the group in 2018”. Shares dropped 27% to 81.9p.

It was a much better week for Zanaga Iron Ore after it was awarded an environmental permit by the Republic of Congo authorities for its Zanaga project in the central African country.

The AIM-quoted company originally applied for the permit back in 2014 and submitted an amended version earlier this year.

Zanaga said the award was a “significant milestone” as it takes the project another step closer to development.

On top of the permit, the recent rise in the iron ore price won’t harm either. Shares jumped 68% to 10p.

Rounding things up this week is one of the junior market’s biggest companies, Fever-Tree Drinks, which has endured a rollercoaster few days.

The posh tonic maker fizzed higher on Tuesday after its annual November guidance upgrade confirmed what a lot of investors had hoped for/ expected: full-year results will be “materially ahead” of current forecasts.

Shares quickly went flat on Wednesday though with investors starting to take profits as the stock headed back towards all-time highs.

With the up closely followed by the down, Fever-Tree finished the week marginally in the black at £20.658, valuing the company at almost £2.5bn.

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