Fund Managers Comments – January 2014
It has been a very interesting start to 2014, with Xeros, an investment in the UK Tech Fund I, recently announcing it is exploring the possibility of a float on the AIM market at potentially several times the level of our original investment.
We have seen further indication of the interest in investing in the assets of UK University Technology spin-outs, with IP Group buying Fusion IP at 82p a share (cash and IP Group shares) which values Fusion at £87.8m (Fusion closed at 63p). The last figures from Fusion on 31/7/13 valued their portfolio at £25m and cash in balance sheet of £21.7m. Therefore this is around 1.9x gross assets. IP already owned 20% of IP and has preferential rights to investing in Fusion companies.
At the same time IP Group is raising a further £75m to £100m at 165p a share against a net asset value of 77p a share reported at October 30th 2013, or 2.1x net assets.
Public Markets
The public market has, since September 2013, seen a rise in asset values in this space. From the IPOs of Kromek (listed at 51p now trading at 75p) and Applied Graphene Materials (listed at £1.55p now trading around £4.00) to the rise in share prices at the publically quoted fund managers, IP Group and Imperial innovations and now confirmed by the financial Institutions backing IP Group at these valuations in this transaction.
Our own experience is that this is having a knock-on effect in the private market and that there is more money chasing investment than before (leading in two recent cases to investors being scaled back in their demand in deals with which we are involved).
This may indicate the market is beginning to turn from being a straight buyers market with investors dominating the investment terms discussion with companies. In turn this could make it more difficult for newcomers to invest in this space.
Discount to NAV
With the additional tax reliefs offered under the EIS, investors in Parkwalk Funds are investing at a 30% discount to NAV rather than a multiple.
We have recently launched our Parkwalk UK Tech Fund V to investors (aiming to invest over the tax year 2014/15) some of whose investment will be in follow-on rounds from our existing portfolio of 27 companies, thereby allowing us to sidestep any difficulties others might have in finding suitable investments in 2014/15.
Recently Closed Investments
In the last three months Parkwalk have lead an investment into Arvia Technologies, lead a £5m round into Oxford spin-out YASA Motors and closed follow-on funding rounds into three other portfolio companies – please be in touch if you would like further details of these investments.
Portfolio Updates
We have also met with or spoken to the management of many of our portfolio companies over recent months, so if you would like an update, please be in touch.
