Valued at £2 billion, Keywords Studies It barely fits the profile of a small cap company.
Despite this, its meteoric rise (its shares have risen almost 1,500 per cent since its admission to AIM 11 years ago) demonstrates that the AIM market remains a powerful hotbed of growth companies.
The challenge for Keywords, a provider of support services to the gaming industry, is that it has outgrown the capacity of the junior exchange.
A moderate valuation, due to the looming but unrealized threat posed by artificial intelligence, coupled with a challenging environment for the gaming industry, allowed Swedish investment firm EQT Group to make a strategic move.
A takeover price of £24.50 per share has been proposed (a reduction of £1 on the initial offer), but it appears to be a proposal that Keywords’ board is willing to support, having requested an extension of the deadline until the following Wednesday.
Huge growth: Keywords Studios shares are up almost 1,500 percent since entering the AIM market 11 years ago.
Broker Shore Capital considered the offer reasonable, considering the “recent headwinds to the stock’s value.”
However, Peel Hunt, which values the shares at £33, sees EQT’s offer as exceptionally advantageous.
Reflecting progress towards a definitive agreement, Keywords shares rose 5.6 per cent to £23.
Keywords is not the first AIM success story to emerge during this challenging transition phase and, sadly, it is unlikely to be the last, given the persistent undervaluation of Britain’s listed growth sector.
Turning to broader market dynamics, the AIM All Share Index fell 1.1 per cent to 765.73 points, underperforming the benchmark FTSE 100 index, which has remained relatively unchanged over the past five trading sessions.
The week was favorable for the tidal energy company SIMEC Atlantidawhose shares more than doubled on Tuesday following the release of its delayed preliminary results, showing a staggering 678 per cent rise in net assets to £44.2 million.
This more than quintupled the market capitalization before the announcement, driven by a revaluation of SIMEC’s battery storage projects. For the week, the stock was up 130 percent.
An encouraging trading update boosted shares of small constructiona video game publisher and developer, sending its stock price up 40 percent.
Actions in Gelion rose more than 35 percent on Wednesday after announcing a partnership with mining and commodities giant Glencore to advance the commercialization of its cutting-edge battery technologies.
Although there was some profit-taking in the following days, the stock ended the week with a gain of 17 percent.
Capital metals experienced the most significant drop of the week, falling 58 percent after potential partner Sheffield Resources halted plans to acquire a stake in the Eastern Minerals Project in Sri Lanka.
Investors in Bushveld Minerals and Renalytix It also faced challenges; shares of the former plunged 47 percent due to financial constraints, while the latter saw a 37 percent decline amid negotiations with the Nasdaq to avoid a stock suspension in the US after failing to meet two listing requirements, including a minimum valuation threshold.
To conclude on a positive note, let’s reflect on the recent performance of two nascent IPOs:Propeller exploration and European green transition.
The price of its shares in Helix Exploration, a pioneer in helium projects in Montana, has risen 120 percent since its launch in April.
Oak Securities, a research firm focused on natural resources, predicts a bright future and recently raised its share price target to 93p, almost quadrupling the current trading price.
The European Green Transition, while not experiencing such a dramatic increase, still generated a 50 percent return to early investors.
Both companies share solid management, a well-articulated strategy and a committed investor base.
For all the breaking news on small cap companies, visit www.proactiveinvestors.com.
