MIDAS STOCK TIPS: Betting on Molten Ventures could be a sure-fire winning bet

Online banking group Revolut is one of the UK’s largest and best-known technology companies.

Founded in 2015, Revolut has received criticism over the years but today has around 45 million customers, recently obtained a banking licence and is considering a float of more than £30 billion on the London Stock Exchange.

Bankrupt companies He invested £11m in Revolut three years after founding the company. Today, that stake is worth around £65m.

Founded by two former executives of private equity group 3i, Molten invests in young, fast-growing technology companies, providing them with cash and expertise to help them expand.

The group focuses on companies that have already made progress but need external support to develop their potential. The rewards in this area can be substantial.

Chief executive Martin Davis targets companies that can generate at least five times their original investment and ideally ten or twenty times more. Returns don’t come overnight. Davis tends to hold stakes in companies for five to ten years and some do better than others.

Overall, though, Molten’s track record is encouraging. The group went public in 2016 and has since generated more than £600m as its companies have been floated, sold to larger companies or transferred to private equity owners.

Davis has a wide network of contacts. Molten has investments in more than 130 companies with varying degrees of maturity. Some may fail, while others will probably exceed expectations. However, in the past eight years there have been only a handful of failures, which have been more than offset by major successes.

While Molten’s portfolio spans dozens of companies, Davis and his team are focused on a core of 15-20 companies, spanning all aspects of technology. The largest investment, Thought Machine, helps traditional banks modernise their payments systems and counts Lloyds, Standard Chartered and JP Morgan among its clients.

Having invested £36m in Thought Machine, the group’s stake is now valued at almost £100m and is expected to rise further. Data cloud specialist Aiven could be even more impressive. The private equity firm invested £4.6m in Aiven and it is now valued at £82m, suggesting a return of almost 18 times.

Many big investors are concerned that Molten’s valuations are too optimistic. The company claims its investments amount to around £1.2bn, but the stock market values ​​the group at just over £700m – a 40 per cent discount. This scepticism is understandable. Technology stocks have come under attack around the world and not even the biggest companies have been immune.

However, Molten’s recent deals offer some relief. Last week, Davis sold his stake in artificial intelligence company M-Files for £47m, having invested £6.5m in the business. In April, an original £9m investment in breast surgery specialist Endomagnetics generated a £35m return when the business was sold to a large US medical group.

Two other transactions yielded successful results, with all four investments selling for roughly the same price or more than they were valued on Molten’s books.

Midas Verdict: Molten Ventures shares are at £3.87, down from £11 three years ago. Investing in young tech companies is inherently risky, but Molten’s broad portfolio provides resilience and the track record since IPO is reassuring. Molten shares are not for the cautious, but adventurous investors looking to back UK tech companies could bet on this stock.

Listed in: Main market Heart: GROW Contact: moltenventures.com or 020 7931 8800