Are we starting to see a break in the small-cap funding logjam of the past two years? Possibly, but don’t expect it to last long.
Since the beginning of May, growth companies have raised around £230 million in new investments. While that may not sound like a huge amount, it marks progress compared to the £208 million raised in IPOs and follow-on funding in the first quarter.
This funding surge is expected to be brief, with pent-up supply being released ahead of the General Election.
The prevailing sentiment in the Square Mile is that funding will dry up after the vote and as London heads into the slow summer months.
The past six weeks haven’t been all smooth sailing. Companies have had to offer steep discounts to secure substantial funding, causing significant dilution for investors, despite efforts by retail platforms like REX and Primary Bid to mitigate this issue.
Excluding the £31 million raised by newly-listed mid-cap Raspberry Pi, about £40 million in new investments have flowed into small caps this week alone, based on regulatory statements.
AFC Energy raised £13.5 million to expand its hydrogen generator partnership with Speedy Hire, while Helium One secured £8 million to develop its Tanzania projects. Directa Plus also raised £6.9 million, a notable achievement given the challenging fundraising environment earlier this year.
It will be interesting to see if the pool of risk capital grows in September, especially if interest rates start to decline.
Now, turning to the wider market. European markets were rattled by Emmanuel Macron’s unexpected call for a general election in France. The impact was felt more strongly in the lower reaches of the UK market, with the AIM All Share dropping 1.6% to 780.33, while the benchmark FTSE 100 lost just 1%.
