The days of inexpensive capital are undoubtedly behind us, a reality that UK small caps grasp more than anyone as they struggle to secure affordable working capital in the market.
This challenge was embodied by MGC Pharmaceuticals Ltd (LSE:MXC, OTC:MGCLF, ASX:MXC) and Versarien plc, two companies that acted on the advice of the legendary Freddie Mercury, who famously claimed, “The show must go on.”
On Friday, MGC Pharmaceuticals raised £700,000 by issuing new shares at 0.12p each, a move that meant a 57% discount from Thursday’s closing price. Predictably, the share price fell by a similar margin.
Investors’ willingness to fund these companies, despite the financial climate, attests to the solid fundamentals of MGC Pharmaceuticals and Versarien.
However, it wasn’t all about discounts in the junior market. Financial firm STM Group announced a cash takeover deal with Pension SuperFund Capital on Tuesday, valuing STM’s share price at 70p. This represented a staggering 162% premium on Monday’s closing price. Following the announcement, STM shares doubled and despite slight retraction, ended Friday 76% higher.
Overall, the junior market showed strength with the AIM All-Share Index experiencing a 1.3% increase, ending the week at 751.64, which showed notable recovery from recent losses. This uptick was partly fueled by a significant drop in consumer price inflation in the US.
Meanwhile, UK’s GDP contracted 0.4% YoY in May, a figure less bleak than analysts’ prediction of a 0.7% contraction, offering some economic solace.
In industry news, Helium One Global Ltd (AIM:HE1, OTCQB:HLOGF) led the way in heavy industries, as its shares jumped over 70% during the week after gaining control of its drilling operations in Tanzania. Close behind was Deltic Energy PLC (AIM:DELT), which saw a 69% increase in shares after revealing a substantial upgrade to resource estimates for the Shell-operated Pensacola discovery in the North Sea.
However, the fashion and media sectors were hit hard, with Unbound Group PLC (AIM:UBG) seeing a 60% tumble in share value after it announced potential insolvency. The shoe retailer had been unable to find a buyer after offering itself for sale earlier this year.
Similarly, ZOO Digital Group Plc (AIM:ZOO) experienced a 36% drop in share value to 74p following the disclosure of an accounting error, resulting in lower-than-expected profits. Further compounding this was the firm’s decision to downgrade its revenue guidance due to cost-saving measures being implemented by its clients and an ongoing Writers Guild of America strike.
Other companies, such as Fiinu Plc (AIM:BANK) and health service provider Totally Plc, also faced significant share value decreases due to an inability to secure enough funding and an anticipated drop in revenues and profits, respectively.
