Small-cap watchers will not have failed to notice the flotation of the Chinese restaurant group Tasty last week. The shares were placed at 52p by broker Evolution Securities and by Thursday morning the stock was trading at 130p, a 150 per cent premium for anyone lucky enough to have been given a chance to buy in at the placing.
However, not everyone involved in the market is impressed. The group's founders and directors still own more than 85 per cent of the shares, making the current market price pretty well irrelevant. Market makers pointed out that the tiny free float means that the company is still in effect private, and almost any trade is enough to move the price.
The stock has a normal market size of 2,000 shares, meaning that a market maker will honour the price shown in any deal of 2,000 shares or less. Outside of 2,000 shares, a trader could be looking at a price well outside of what is shown.
The company currently runs three dim sum restaurants, and plans to open another six using the £1.75m raised by the placing. Even taking into account the entrepreneurial skills of the founding Kaye family, the family behind the successful ASK and Zizi Italian food chains, a market capitalisation at 130p of almost £30m was asking investors to believe in miracles.
For private investors the problems buying shares on the way up are likely to be far worse when trying to sell them on the way down. The tiny free float means that there is likely to be very little buying support should the price start heading in the opposite direction, which it did by the end of the week, and if majority shareholders start selling to improve liquidity private investors will want to follow suit.
Aim has no limits on majority shareholdings and investors caught up can only blame themselves or their broker if the shares retreat back to the placing price.
Sun looks set to shine
Sun TV Shop, another new listing on Aim last week, looks to have exciting prospects and is the first Chinese media company to list in the UK.
The group aims to cash in on demand among the rapidly growing middle class in China for genuine designer luxury and consumer goods by providing a commercial and distribution channel, while at the same time keeping counterfeiters at bay.
Having a few familiar faces on board for media ventures is no bad thing, and Sun TV Shop can count Dr Bruno Wu and Yang Lan among its key investors. Who are they, you may ask? Dr Wu runs Sun New Media Investment Holdings, one of China's largest media groups with over 600 titles in publication, including the China Business Post. Yang Lan, his wife, is by all accounts the Chinese equivalent of Oprah Winfrey.
Thanks to its connections with Sun New Media, Sun TV Shop has unfettered access to a fibre optic web covering a staggering 440 Chinese cities. The company, focused on e-commerce and television commerce, will have access to almost half the Chinese population.
The group has raised £5m through a private placing and may seek further funding through institutional investors at a later date. This is not one for widows and orphans - the free float, like at Tasty, is fairly small, and dealing with China is risky at the best of times. But the potential is vast and Sun TV Shop is worth closer inspection.
Goodbye to OFEX
PLUS Markets announced its decision to stop using the OFEX name last Monday. It's the end of an era for London's third equity market, founded by John Jenkins in October 1995, although the market should continue to prosper and provide improved trading conditions for quoted companies despite the name change.
Over the years OFEX has provided a home for smaller companies unable or unwilling to try their luck on Aim or with a full listing. There are currently 162 companies quoted on OFEX with a combined market capitalisation of £1.9bn, by no means an insignificant sum.
For most small-cap investors, increasing member companies, improving liquidity and greater competition among market makers can only be a good thing. With Aim becoming increasingly expensive for companies with market capitalisations under £10m, the new PLUS Markets version of OFEX looks a solid bet for continued growth. The name change is expected to take full effect in about four months, after legal and technical changes have been effected.
Platinum-plated plea for £12m
Sylvania Resources, a South Africa-based chrome and platinum mining group, is set to begin trading on Aim later this month. The group has appointed Williams de Broë as its nominated adviser and broker and is hoping to raise £12m through a placing with institutional investors. The company owns 25 per cent of a platinum producing project led by Aquarius Platinum, the FTSE 250 listed mining group. Proceeds from the placing will be used to further develop new platinum and chrome projects in South Africa.
The company is chaired by Ed Nealon, a former director of Aquarius and a well-known name to UK mining sector followers. The board also includes Melissa Sturgess, currently executive chairman of Dwyka Diamonds and one of the very few female executives in the UK mining sector.Reuse content