During a tumultuous week in the market, it was inevitable that some small-cap companies would suffer losses, particularly those in the natural resources sector. Yet it was the banking sector that stole the limelight, yet again.
Smaller US banks, such as Silicon Valley Bank (SVB), may be considered outliers because they operate in niche markets and are not subject to the same liquidity regulations and stress tests as larger banks. Credit Suisse, on the other hand, has been mismanaged for many years but is expected to endure with better leadership and a substantial cash injection.
However, it remains unclear whether central banks will intervene with more bailouts and interest rate reductions.
According to reports, UBS is engaging in discussions to acquire Credit Suisse as Swiss regulators bring the country’s two largest banks to the negotiating table in an attempt to prevent a broader crisis. Switzerland’s central bank and financial regulator, Finma, were allegedly coordinating the talks, which could result in UBS acquiring some or all of its struggling rivals.
The Financial Times first reported the potential takeover, indicating that the boards of both companies would meet separately over the weekend to evaluate the potential deal.
While UBS’s market capitalization is valued at over $56 billion, Credit Suisse’s share price plummeted this week, resulting in a market capitalization of just $8 billion by the end of Friday.
As European banks raced to reduce their connections to Credit Suisse on Friday evening, executives at the troubled lender prepared for weekend crisis discussions about its future.
Oil prices initially rose by more than $1 a barrel on Friday, but ultimately settled lower due to banking sector concerns, resulting in the largest weekly decline in months for both benchmarks.
Brent crude futures closed at $72.97 a barrel, down by $1.73, or 2.3%. Meanwhile, U.S. West Texas Intermediate crude decreased by $1.61, or 2.4%, to $66.74.
Both benchmarks were down by over $3 at their session low. Brent crude suffered its most significant weekly decline since December, falling by nearly 12% during the week. Similarly, WTI futures saw their most significant decline since last April, dropping 13% from Friday’s closing price.
On Friday, Predator Oil & Gas Holdings PLC (LSE: PRD) experienced a 20% decline, as anticipated, following the announcement of a conditional placement of 15.5 million new ordinary shares, with a placement price of 5.5p per share. The group’s aim was to raise £2mln to provide complete funding for their MOU-3 well project, which focuses on Morocco.
MC Mining Ltd, which specializes in metallurgical coal assets in South Africa, saw its shares drop by 16% to 8.4p by the end of the week. The majority of these losses occurred on Thursday, following the release of the company’s latest interim report.
Although the report indicated a slight improvement in the company’s losses per share, reducing from 0.54 US cents to 0.5 US cents, much of the focus was on the company’s need for additional funding, which could come in the form of debt or equity rounds.
Burford Capital Limited (LSE: BUR) distinguishes itself among AIM companies by offering litigation finance services along with risk management and asset recovery solutions. When a legal financing company provides funding, it assumes the risk of the lawsuit and covers the expenses of legal fees and other associated costs.
If the plaintiff wins the case and receives a settlement or award, the financing company is entitled to a portion of the recovered amount. However, when there are no ongoing claims, as was the case during the pandemic, Burford’s cash flows are significantly impacted.
Despite this, Burford experienced a robust recovery in 2022, with cash receipts rising by 33% to US$350mln (£288mln). Additionally, over 30 trials and final merits hearings are scheduled for 2023, which is almost triple the number of hearings held in 2022.
However, despite the positive trading update, Burford’s shares fell by 20%.
The Gym Group PLC (LSE: GYM) experienced a 25% decline in its share price over the week due to concerns that rising costs would offset any progress made in full-year revenues. In a statement accompanying its results for the 12 months to December 31, 2022, the gym operator stated that it expects the challenging macroeconomic conditions and their effect on consumer demand to continue throughout the year.
It appears that fitness is becoming a casualty of the rising cost of living, although fitness enthusiasts may take advantage of the warmer weather expected in the near future.
On a positive note within the AIM market, Verditek PLC (AIM: VDTK), a clean energy group, rose over 30% on Friday after declaring an exclusive three-year supply agreement with Lindab Profil for the provision of solar panels.
4imprint Group Plc (AQSE: FOUR), a specialist in direct marketing products, was also sought after as it announced a special dividend after a successful year.
In a completely different sector, Blue Star Capital PLC (AIM: BLU) closed the week with a 33% increase following the announcement by Pendulum, a company incubated by Blue Star’s investee company SatoshiPay, about the launch of a blockchain protocol for bridging the popular Polkadot and Stellar blockchains.
Additionally, the AIM All-Share Index fell by almost 3% to 813.27 as of midday Friday, a better performance than the FTSE 100, which dropped by more than 4%.
