Are we starting to see a break in the small-cap funding logjam of the past two years?
Possibly. But don’t expect it to be a long-lived phenomenon.
Since the start of May, growth companies have raised around £230 million of new investment.
Now that may not sound a huge amount, but it represents progress when you realise that a total of £208 million was raised in IPOs and follow-on funding in the first quarter.
This funding renaissance is expected to be short-lived with pent-up supply bursting through ahead of the General Election.
The prevailing feeling in the Square Mile is the taps will be turned off after the vote, and as London heads into the dog days of summer.
And don’t think the past six weeks have been a period of unalloyed joy.
Companies have been forced to take steep discounts to get away some chunky fundraisers with investors asked to endure significant dilution – much as retail platforms such as REX and Primary Bid have tried to mitigate the latter issue.
If we ignore the £31 million in new funding being raised by newly-minted mid-capper Raspberry Pi (LSE:RPI), the starter computer maker, around £40 million of new investment has come found its way to small-cap-land this week alone (this is based on a trawl of the regulatory statements).
AFC Energy secured £13.5 million to expand its hydrogen generator partnership with Speedy Hire, while Helium One raised £8 million to develop its Tanzania projects.
Directa Plus also raised £6.9 million, notable because such fundraising efforts would have been improbable earlier this year or would have involved much smaller amounts.
It will be interesting to see whether the pool of risk capital grows once we head into September – particularly if interest rates finally start to move lower.
Anyway, sermon over. Let’s take a look at the wider market. Across Europe, the markets were spooked by Emmanuel Macron’s decision to call a surprise general election in France.
The jitters were felt more acutely at the lower reaches of the UK market than among the blue chips as the AIM All Share dropped 1.6% to 780.33.
By contrast, the benchmark FTSE 100 lost just 1%.
It is really hard to fathom just what’s going on at Kibo Energy, the micro-micro-cap that last week announced a fundraiser and a slew of boardroom changes.
Earlier this week those plans were rolled back – leading to a more than doubling of the share price.
Over what has been a roller-coaster five trading days, the shares were on Friday up just 7% compared to the same point last week (head shake for effect).
The week’s biggest faller, down 81%, was R&Q Insurance, which spooked the market by saying it is mulling provisional liquidation in Bermuda before then completing the sale of its Accredited business.
Destiny Pharma lost a third of its value after its chairman Nigel Rudd said the group, which has developed two phase III-ready anti-infectives, was assessing its strategic options given “current cash runway [and] feedback from potential partners”.
Turning to the week’s risers. If ever there was an example of little news seemingly going a very long way, then it came in the form of Clontarf Energy.
Up 132%, the shares reacted positively to an update accompanying its long-out-of-date prelims (to December 31, 2023) that was seemingly positive for its lithium assets in Bolivia – with knock-on positive implications for funding for Clontarf. The rest of us we simply left to scratch our noggins.
Baron Oil (AIM:BOIL) shares (up 50%) built a head of steam this week ahead of reaching a major value catalyst.
Right now, Baron is undertaking preliminary work – completing site surveying, rig contracting and permitting for the Chuditch gas discovery in Timor Leste.
Finally, the choppiness seems to have settled for SRT Marine, the maker of navigation equipment, which last week rather confused the market with its bad-news-good news trading update.
Having had a full week to assimilate its contents, investors gave SRT the thumbs up as the stock sailed 27% higher.