Abinger's harbinger of bigger things

No pain no gain

Buying shares in a fledgling venture can be rewarding for the small – and patient – investor. New and often untested companies frequently appear on the stock market even in these dull days. But there is, unless you are in the know or have a significant bank balance, little chance of the average private player picking up shares on the cheap before flotation.

The best private investors can expect is to buy in the months after the shares have been floated, or on the back of an early deal that entails the issue of more shares which act as a drag on the price for a time.

Abinger Investments could be such a candidate. It has been quoted for less than a year and has just put through its first takeovers. What's more, it is aimed at small investors and small companies. It is still feeling its way but, if all goes according to plan, Abinger could emerge as something of a power in the financial community.

At such an early stage in a company's development much has to be taken on trust with the records – and intentions – of the people involved which is the best guide to the future. There is no doubt the men behind Abinger have been round the financial block a few times and have the experience and know how to create a new group.

Of course, any fledgling investment carries a higher degree of risk than, say, a blue chip. But Abinger could be a rewarding pin-money punt for brave investors.

Leading the Abinger adventure is Stephen Barclay, 59, who has been advising small companies for many years. He was largely responsible for putting together the quoted Seymour Pierce financial and stockbroking group.

Mr Barclay launchedAbinger on the market last summer, raising £920,000 in the process. In November came the first deals. City Financial Associates (CFA) was acquired for £500,000 in shares, and a further £1.4m (in cash and shares) was spent buying Galleon Asset Management.

CFA is a small-company adviser run by Mr Barclay and his team: Galleon is a private client stockbroker, based in Manchester and born out of the old-established Gall & Eke. It has nearly 14,000 clients. Behind Galleon is Mark Sheppard, who is a former drinks analyst at ABN Amro.

I would be surprised if Abinger, which accompanied the takeovers with a £1m share placing, indulges in other major deals in the next few months. It plans to grow by acquisitions. But with so many redundancy notices flying around the City it intends for the time being to rely on those dropping out of work and feels it should be able to recruit top-class people to increase its firepower. Naturally, share options, already a big feature at the group, will be a major part of its hello packages.

Still, I would expect it to be padding along the takeover trail later this year.

Despite the plethora of small-cap advisers, it feels the financial community has yet to come to terms with all the needs of smaller companies. "There is a vast gap to be filled," says Mr Barclay. "We intend to specialise in small companies but, of course we would not turn away Vodafone if it came knocking on our door. But our aim is to accommodate entrepreneurs."

A banking licence and an investment management business are on the Abinger agenda. It is also thinking of developing a private equity entrepreneurs club. An AIM- quoted investment company, perhaps called The Punters' Fund, is another possibility. As the potential name implies it would be geared to small investors and specialise in offbeat and speculative situations.

Abinger's backers, with their small-company approach, are clearly geared to the small investor. The company, I believe, is a classic penny punt. For the £1m placing the shares were sold at 1p each. They are now around 1.25p.

Experienced investors, with a little cash to spare, should be tempted. They may not be getting in on the pre-flotation ground floor but Abinger is still a long way from even reaching the first storey.

derek@derekpain.totalserve.co.uk