Fund Managers Comments
UK Technology Companies Financings Background
There has been a strong UK IPO market in 2013 according to Dealogic who state that 44 companies have gone through a successful IPO on the London Exchange (Full List and AIM) in the first nine months of 2013 raising £6.6bn, three times the amount raised in 2012. This is the highest amount since 2007.
The London AIM market has been exceptionally busy. In Q3 2013 PWC report that there were 20 IPOs on AIM raising £470m compared to the same period in 2012 when there were 13 IPOs raising £200m.
While many of these IPOs were sales from private equity or funds raising money, technology companies have begun to become part of the picture.
University Spin-out IPOs
Perhaps the most interesting IPO from the standpoint of Parkwalk’s investment strategy has been that of the Durham Spin-out Kromek. It started life in 2003, well before Parkwalk existed, and as such we are not an investor. However its successful IPO in October bodes well for many of the companies in our portfolio, particularly Symetrica whose business overlaps some of Kromek’s activities. Kromek successfully raised £15m at a pre-money valuation of £40m (51.0p a share) and is currently trading around 65.0p a share.
It has been announced in the press that Imperial Innovations’ largest company (around 24% of its total portfolio valuation), Circassia will seek to IPO in the coming months at a valuation of around £400m. If this were successful it would do a significant amount to underpin, and possibly raise, valuations in the sector.
Applied Graphene Materials (in which IP Group holds a 25% stake) announced in October it was seeking to IPO and raise around £10m. It is another spin-out from Durham University.
Funds Specialising in University spin-outs
Cambridge University announced the successful closing of Cambridge Innovation Capital, a £50m Fund, which will invest in growth funding rounds in Cambridge University spin-outs and other Cambridge based technology companies. As a result it will likely overlap some of its investments with the Parkwalk managed University of Cambridge Enterprise Funds.
Neil Woodford, the uber fund manager at Invesco, announced he was leaving the firm in April 2014 to set up his own Fund Management group. Under his guidance Invesco has been a significant investor in this space. Invesco own substantial stakes in IP Group and Imperial Innovations as well as a number of direct stakes in private and public companies in this space. It is speculated that his new management firm will follow a similar investment strategy.
Implications for Parkwalk’s Investment strategy
The strength of the public markets is excellent news for our portfolio of investments as it should increase valuations in both the public and private markets (as private tends to ‘feed off’ public). It is also likely to mean more exits in the space as a whole as IPOs become an option and companies looking to acquire technology in trade deals will also be able to use their publically quoted paper.
In the short-term there may be an opportunity arising as a result of the changes at Invesco which could lead to private valuations plateauing if Invesco were to reduce its exposure in this area until they likely rise once it becomes clear what investment strategy Neil Woodford’s new vehicle will adopt.
We have a number of companies in our portfolio contemplating an IPO in the next 18 months.
Current Parkwalk opportunities
We continue to see interesting investment opportunities throughout the year and this is increasingly being matched by demand from our client base for year-round EIS investments.
Our evergreen Opportunities Fund and our non-domiciled investor ZeroND Fund cater for this and allow our investors to deploy capital, and claim reliefs, faster. In the near term, we have two or three investments we will look to make before the end of the current tax year and we ask our investors to be in touch if they would like to find out more.
