Treasure-hunting in the Ofex

No Pain, No Gain: Derek Pain

Motion Media, the star performer of my Ofex portfolio, is due to graduate to a full listing next month. Since I drew attention to the company in September the shares have climbed from 90p to a 2,775p peak before they were suspended in the run up to the flotation at 2,275p.

The video phone group evolved from Inmos, one of those over-hyped Government initiatives such a major part of Westminster thinking a few decades ago. Ken Burgin, MM's 43-year-old founder and managing director, spent eight years with Inmos which carried Britain's hopes in the then-fledgling microchip industry.

The shares arrived on the fringe, lightly regulated Ofex market nearly four years ago at 67.5p. Until they took off last year they had, except for a few flurries, attracted little interest and at one time fell to around 50p.

Helped by a series of intriguing developments and the telecoms boom, the shares romped ahead and it soon became clear MM had made more than enough progress to justify elevation to the full market.

Capital changes ahead of the flotation acknowledge the dramatic fall from grace of high-tech shares. The sharp declines should not surprise readers of the no pain, no gain column but could not have come at a worse time for a telecom company going upmarket. There was talk of the shares being priced at 200p. The group settled for a more realistic 140p, putting a price tag of 1,400p on the shares in their old Ofex form.

The group is raising £16.9m and at the issue price is capitalised at £141m. Refreshingly, directors are not cashing in on the float by selling shares. MM is, as befits a high-tech company, loss-making and although chairman Rex Thorne looks forward to an "exciting" future there is no profits forecast and dividend payments could be a long way off. Although a small player in an industry dominated by giants, it is difficult to disagree with Mr Thorne's assessment.

MM does have an array of intriguing products, from video phones to video conferencing systems and surveillance products.

Intriguing opportunities are offered by the video communications market. Besides the video phone there are possibilities for healthcare such as links between various hospital units, and support for elderly or infirm people in their homes. Then there is the great Orange hope - video mobile phones. MM is helping develop the new Orange video mobile, due to be launched later this year.

During MM's final days on Ofex there were rumours Orange would be involved in the flotation, possibly taking up to a 10 per cent stake. But if Orange does nurse such an intention it is waiting until after the shares are trading on the stock market.

The elevation of MM means my Ofex portfolio needs strengthening. There are only two remaining constituents which have had a mixed time.

Cardington, an events and exhibitions organiser which has the Public Record Office at Kew as one of its clients, has moved from a 30.5p tip price to 57.5p; the shares have touched 122.5p this year.

MILs Technology has fared less well, falling from 41.5p to 28.5p. The group is developing an under-floor lighting system to help evacuation from confined areas, such as aircraft and ships. It recently produced an encouraging progress report and says it should soon be in a position to meet orders. I am not too worried by the share fall.

I have not decided on an Ofex replacement for MM. I hope to alight on a suitable share (or shares) in the next few weeks. Ofex can be a high-risk area, even for experienced investors. It is more a share trading facility than a share market.

It offers a vital avenue for the development of small companies and has witnessed the arrival of a few fully-listed high-tech stars which are still showing spectacular gains for those who got in during their Ofex careers.

EasyScreen, Knowledge Management Software and Robotic Technology are three which have rewarded investors who backed them when the companies took the Ofex route.