Small-cap stocks have not been immune to the sentiment-driven market decline this week.
Concerns about inflation, higher interest rates and the general state of the global economy sent AIM All Share skidding.
It fell 4.2%, which more or less tracked the performance of the FTSE 100 over the week.
Egg-free baker Cakebox issues profit warning, blaming inflationary pressures
But while the blue chip index has drifted less than 5% so far this year, underscoring its strength, the junior market has lost 29% of its value.
Why disconnect? We see that the Footsie is home to the safe haven stocks sought in times of turmoil.
The flip side of this equation is that those looking for a safe place for their money tend to be the same people who exit riskier investments on AIM.
With the intensification of trade sanctions against Russia and the outlook for inflation and economic growth rather gloomy, there seems little respite in sight for those who have injected liquidity into junior stocks.
Now, if you’re an opportunist, current conditions create good business opportunities.
Indeed, that is exactly what it seems Neurocrine Biosciences has found.
On Tuesday, the California group tabled a £48million knockout bid for Diurnalwhich was 141% premium to Friday’s closing price.
Yet at 27.5 pa the offer is still well below the 66 pence the stock changed hands for in January and well (well) down from the 2018 high which saw Diurnal drop to 200 pence .
As tech stocks globally have fared poorly as hyped valuations have reset, there has been a strange exception to the general rule.
bongo was a case in point. Its shares rose 22% this week after it signed a deal to acquire Japanese giant NTT’s mobile payments platform Docomo for a negligible sum.
But make no mistake, this is a transformational deal for the British band.
Broker Liberum estimates that the annualized cost synergies from combining Bango’s business with Docomo Digital will be in the region of £18m by 2023.
Adjusted profit, meanwhile, will rise by more than 50% to £25.5million the following year, he added.
Sticking to the risers, small cap oil and gas stocks have been well bid – again.
The now indiscriminate buying in the sector reflects a growing belief that industry regulations will be changed to allow more onshore drilling in the UK.
The current assumption is that energy security will be one of the first issues to be addressed by the new Conservative administration led by Premier-elect Liz Truss.
Up 76%, Angus Energy led the field after beginning to make its first gas sales from a field it operates in Lincolnshire.
Whereas Rockhopper Exploration returned some of the gains made last week, down 15%, its cohort working in the waters off the Falkland Islands had a stellar week, with Argos Resources and Borders & South both up more than 20% with no news.
Chatter on the bulletin boards suggests there may be a roll-up to be done in the South Atlantic.
Turning to the slaughterers, Serine Energy on Friday, after confirming that their last pit, Romania was a dud.
Although there were gas emissions, they were not sufficient to warrant testing. Work will now focus on a second well near the existing gas infrastructure.
Petroneftwhich operates in Russia’s Tomsk oblast region, saw its shares fall 28% this week after saying it was in a standoff with the company that stores and transports its oil.
cake box Shares fell past 20% after sounding the alarm over profits, with the eggless baker blaming inflationary pressures for its struggles.
Finally, the first IPO of the new month took place on Friday.
Zamaz, an ethical consumer goods company, came to market via a direct listing, backed by stakeholder Atlas Capital Markets.
He has raised just under £4million by issuing new shares and has a £15million loan facility he can draw on.
The Zamaz portfolio includes Ecomoist, an eco-friendly screen cleaner derived from natural sources, and Bella Dispensa, an innovative online grocery store in Italy.
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