Portfolio overview Q317

Almost successful issues

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The past two post I have focused on issues and IPO. This again will be the topic but from a different angel since A1M Pharma completed their issue this week and BrainCool announced a very peculiar form of private placement. Some issues are at best almost successful issues, which A1M Pharma is an example of. And of course there is the farce of the week: the postponed listing of lauritz.com. That wasn’t even ‘almost successful’ but straight out unsuccessful and made the laugh of the month.

Almost successful issues

Last week I argued that the high number of listings and issues the past months tend to put pressure on the price of existing shares. The other side of this is that not all IPOs and issues can be successful when investment funds are limited and there is as fierce a competition as it is at the moment. This week I have noticed at least three less successful IPOs or issues where the companies having difficulties finding investors. Friday 10th it was Mobile Loyality (66% subscription) and Thursday Crowdsoft prolonged their subscription period (= need more time to find investors), and Wednesday A1M Pharma announced they only got subscription for 63% of the shares in their issue, and only reached the target of 39.3 MSEK thanks to the guarantee providers. The cost of the guarantee – or in fact an insurance – is 2 MSEK.

As participant in the A1M Pharma issue, I am of course not all too happy of the outcome. Let 1A1Malone the negative effect of an issue, an only partly successful issue puts even more pressure on the share price. In A1Ms case the price on Friday were 13.5 % below the issue price and probably will continue downwards. Currently my position in A1M is limited and I can live with the loss. In a year or two, it will probably turn out to be an investment worthwhile with a significant profit…but it annoys me a bit that I paid 6 SEK per share in November, and now the price is 2.25.

A new variety of issues?

BrainCool announced this week that the company intends to make a private placement of 22.5 1BrainCoolMSEK. Private placements is normally aimed at larger and sometime strategic investors. BrainCool choose another path, since the announced a private placement among investors with an account at Avanza Bank. The intention is both raising money and broadening the investor base in order to raise the liquidity of the share. The subscription period is until June 16th and the price is 92% of the average price between June 8th and June 16th.

There is no doubt that this is a cheap way of raising money – the requirements for information prior to the subscription is limited compared to a public issue and the timespan is shorter. On the other hand, aiming the issue solely at Avanzas costumers and thereby excluding a large number for possible investors, limits the number of possible investors and thereby raising the risk of the issue substantially. This exclusion of other investors made someone write on Dis Börssnack ‘Why can’t I participate?’ – Obviously, like me, he was not costumer at Avanza.

I am not sure the legislators who made rules on private and public issues had this kind of private placements on their mind when they made rules for issues. The need for information is obvious less when dealing with professional investors in private issues. The general idea is that requirements for information are higher when dealing with non-professional than when dealing with professional investors. By offering a ‘professional’ placing to the typical investors of public issues BrainCool and Avanza are to some extent shorting the protection of the non-professional investor.

The immediate reaction was a share price that dropped from above 14 SEK to below 13 SEK. Hopefully, the composition of the price (8 % below the average in the subscription period) limits the pressure on the share. In public issues, we often see share prices falling towards the issue price, but since there is no fixed price, in theory there should be no fall prior to the issue. But as we have seen the past days, there are.

…And more issues

Friday was the last day of the subscription period for the Dignitana issue. The outcome is not yet 1Dignitanapublic, but I think the subscription will over-subscribed. Compared to A1M Dignitana is far ahead and very near their commercial breakthrough – on Friday the company announced yet another group of clinics that have made contracts for DigniCap.

In general, 2016 have been a busy year in respect of issues. I have made this list of issues showing the issues in my portfolio.

almost sucessesfull issues

Lauritz.com IPO – the laugh of the month

The planned debut on Thursday of the Danish auction house on First North was postponed just 18 minutes before the opening. At first the reasons was ‘technical’, then later on due to Nasdaq and the Danish Finance Inspection and when they both denied any involvement in the decision, the explanation changed again now down to ABG Sundal Collier.

The communication during the day was at best amateurish. That is one thing. The reason for postponing is another: the IPO in Lauritz.com was claimed to be fully subscribed, but have failed to attract larger, stable and long-term investors, claims ABG.

Judged by the communication on Thursday, I am not at all convinced that the issue was fully subscribed. But even if I was, the lack of larger, professional investors indicates that the company and the prising of the shares was seen as unattractive by professionals. I checked very briefly, when the IPO was announced, but I forgot all about investing when I found that the chairman and the CEO are married to each other and read a few newspaper articles on their flamboyant and expensive lifestyle. It seemed as an unprofessional set-up.

ABG gave protection of private investors as the reason for postponing. In this, they are probably right: Without larger investors the free float percentage is probably very high making the share extremely downwards volatile. But still, I am not convinced the IPO was fully subscribed and I doubt that the present set-up in the company will attract any serious investors.

But during Thursday Lauritz.com provided me with live entertainment – and a god laugh!

Check out my growth share portfolio, the share price trigger list or my EGS (Evaluation of Growth Shares) Model.

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