SMALL CAP MOVERS: Keywords Studios’ £2 billion acquisition is a sign of the times
Valued at £2 billion, Keywords Studios hardly fits the profile of a small company.
Nevertheless, the stock market’s meteoric rise (shares have risen almost 1,500 percent since AIM admission 11 years ago) shows that the AIM market remains a powerful breeding ground for growth companies.
The challenge for Keywords, a provider of support services to the gaming industry, is that it has outgrown the junior exchange.
A moderate valuation, reflecting the looming but unrealized threat posed by artificial intelligence, combined with a challenging environment for the gaming industry, allowed Swedish investment company EQT Group to make a strategic move.
The company has proposed a takeover price of £24.50 per share, a reduction of £1 from the original offer. Still, it seems that Keywords’ board of directors is inclined to support this proposal, as an extension of the deadline until the following Wednesday has been requested.
Huge growth: Keywords Studios shares have risen almost 1,500 percent since its IPO on the AIM market 11 years ago
Broker Shore Capital deemed the offer reasonable given the “recent headwinds to share values.”
However, Peel Hunt, which values the shares at £33, sees EQT’s offer as exceptionally favourable.
Reflecting progress towards a final agreement, Keywords shares rose 5.6 per cent to £23.
Keywords is not the first AIM success story to fail during this challenging transition period. Unfortunately, it is unlikely to be the last, given the continued undervaluation of the UK listed growth sector.
Looking at broader market dynamics, the AIM All Share Index fell 1.1 percent to 765.73 points, underperforming the benchmark FTSE 100, which has remained relatively unchanged over the past five trading sessions.
The week was favorable for the tidal energy company SIMEC Atlantiswhose shares more than doubled on Tuesday following the release of its delayed preliminary results, showing a stunning 678 per cent rise in net assets to £44.2m.
This was more than five times the market cap prior to the announcement, supported by a revaluation of SIMEC’s battery storage projects. During the week, the stock rose 130 percent.
An encouraging trading update saw shares KleinBuilda video game publisher and developer, causing its stock price to rise by 40 percent.
Shares in Gelion surged more than 35 percent on Wednesday after announcing a partnership with mining and commodities giant Glencore to advance the commercialization of its advanced battery technologies.
Although there was some profit-taking in the following days, the shares ended the week with a gain of 17 percent.
Capital Metals suffered the biggest drop of the week, down 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 also faced challenges; the former’s shares fell 47 percent due to financial constraints, while the latter saw a 37 percent decline due to negotiations with the Nasdaq to avoid a suspension of its shares in the US after failing to meet two listing requirements, including a minimum valuation threshold.
To end on a positive note, let’s take a look back at the recent performance of two emerging IPOs:Helix Exploration And European Green Transition.
Helix Exploration, a pioneer in helium projects in Montana, has seen its stock price rise 120 percent since its launch in April.
Natural resources research firm Oak Securities predicts a rosy future. It recently raised its target price to 93p, almost four times its current trading price.
Although the European Green Transition did not see such a dramatic increase, it still delivered a 50 percent return for early investors.
Both companies have robust management, a well-developed strategy and a dedicated investor base.
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