SMALL CAP MOVERS: The era of cheap money is over

But, as Freddie Mercury once said, the show must go on.

The era of cheap money is definitely behind us.

No one understands this better than UK small caps, who are finding it increasingly difficult and expensive to approach the market for much-needed working capital.

MGC Pharmaceuticals followed this advice this Friday when it raised £700,000 by issuing new shares at 0.12 pa pop.

This represented a 57 percent discount to Thursday’s closing price. As you might expect, MGC’s share price fell 57 percent.

Versarien also followed Freddie’s advice on Friday. The advanced materials group raised £650,000 by placing shares at 1p each.

This represented a 40 percent discount to Thursday’s closing price. As you would expect, Versarien’s share price fell by (almost) 40 percent.

In any case, it is a confirmation of the fundamentals of MGC and Versarien that investors are willing to put money aside in these difficult times… for a neat haircut, of course.

But it wasn’t just about junior market discounts.

Financial service provider STM group announced on Tuesday that it has reached a cash acquisition agreement with Pension SuperFund Capital.

Under the offer, STM’s share price was valued at 70 pence; a whopping 162 percent premium to Monday’s closing price.

STM shares doubled after the announcement, and while they retreated a bit during the week, they still closed more than 76 percent higher on Friday.

It has been a bullish week overall for the AIM All-Share Index. While it didn’t fare as well as the FTSE 100 blue-chip index, the junior market added 1.3 percent to finish the week at 751.64.

This was a marked improvement on the significant losses experienced in recent weeks.

Equities were supported by a sharp drop in consumer price inflation across the Atlantic.

Closer to home, Britain’s gross domestic product contracted 0.4 percent year-on-year in May, according to Thursday’s data. Undoubtedly sobering news, but still significantly better than analysts’ forecast economic contraction of 0.7 percent.

Helium One Global took pole position in heavy industries, with stocks rising more than 70 percent over the weekly period, and rightly so.

The explorer seized control of his own drilling destination in Tanzania, as he chose to purchase his own oil rig rather than see his timeline bogged down without a contractor.

Thanks to the deal, Helium One expects to start drilling a well at the Tai project before the end of the third quarter.

Deltic energy came a close second after the unveiling of a major upgrade to resource estimates for the Shell-owned Pensacola discovery in the North Sea, of which Deltic owns 30 percent.

Deltic shares rose 69 percent as a result.

Other strong energy performers included Amte Power adding 30 percent, Empyrean energy with 24 percent and Coro Energy with 22 percent.

Much of the market’s downturn was relegated to the fashion and media sectors.

Unattached group’s shares plunged another 60 percent after the announcement of a possible administration. No wonder, as the shoe retailer failed to attract a buyer after putting itself up for sale earlier this year.

Unbound said declaring a potential insolvency would depend on ongoing discussions to implement a formal restructuring plan or raise equity.

ZOO Digital Group saw its shares plummet more than 36 percent to 74 pence after the cloud and media services provider to the entertainment industry revealed it lost profits last year due to an accounting error.

However, it’s not just accounting errors that send Zoo lower. In Friday’s trade update, the group lowered its revenue expectations for two main reasons: cost-cutting measures being implemented by its streaming customers and the fallout from the Writers Guild of America’s ongoing strike.

Elsewhere on AIM, Fiinu shares plunged 69 percent to 2.15 pence after the Plugin Overdraft company said it still hasn’t applied for another banking license because it can’t raise enough money.

Care service provider absolutely, lost 20 percent of its value this week after it warned that revenues and underlying earnings for the coming fiscal year would be lower than the previous 12 months.

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