Trader’s Café with Zak Mir: The Year In Small Caps, Tuesday 27th December 2022

Being someone who (just) remembers the 1973-1974 stock market crash when the FT30 lost nearly three-quarters of its value, the question for much of 2022 was whether were repeating that particular period.

Author @ZaksTradersCafe

I was told that during that time things got so bad that even our friends the market makers were forced to resort to side hustles to keep their heads above water. The analogies between the early 1970s and the early 2020s like the strikes, inflation and energy prices are all obvious for us to see. On this basis, one could argue that the FTSE 100 / blue chip zone, being roughly flat on the year is quite a result. In contrast, the FTSE Small Cap index is off around 20% and feels like it is down much more for several reasons: liquidity, investor apathy and a lack of IPOs being the main aspects that come to mind.

Initial Peak

Indeed, the peak for the small caps was literally the first trading day of 2022, and the low 10% below where we are in October. The recovery was delivered by some special situations, which gave us some of the outstanding stocks of the past quarter. These tended to be companies that had something in common, with key long-awaited milestones / transformational events delivered. They will very often surprise events, as during a bear market just delivering what the market is expecting is not good enough to maintain momentum. For instance, investors licked their lips in November with BSF’s (BSFA) November announcement of prototypes of lab-grown fillets of meat.


While BSF was certainly an out-of-the-blue winner, we could also look to companies who are in the right place at the right time. YU Group (YU.), a challenger supplier of gas, electricity and water to the UK SME and corporate business sector, was able to make hay while the sun shone on its space. It said in November that it would significantly exceed market expectations, and with a market cap of less than £90m even after the autumn gains, it would appear that there is plenty more to come for the bulls.


One of the smartest deals of the year came from Zanaga Iron Ore (ZIOC). Here the mining minnow teamed up with giant group Glencore no less, with the latter taking a minority 48% stake. As well as validation for the Zanaga Project, this puts Zanaga on the runway to production, without having the headache that so many of its peers may have in terms of funding.

Bens Creek

What was noticeable about the trajectory for many small-cap plays was the way that it was the first quarter, where many of them initially flourished. Metallurgical coal group Bens Creek (BENS) rallied from around 30p to over 100p earlier in the year, leaving many chasing this production story high and dry by the end of the year with the stock disappointingly near 20p, after a major shareholder headed for the exit, and after announcements regarding a charge on its stock. Such situations can require an extended period of recovery until those at much higher levels are out of the shares.


It is usually the case that one of the better aspects of small-cap stocks is that investing in them means you are avoiding the slings and arrows of geopolitical and macro events. However, courtesy of this year’s political shenanigans in the autumn, Igas (IGAS) shareholders were marched up the hill and swiftly marched down again. They got the green light for fracking in September under Prime Minister Truss but then lost it again under Prime Minister Sunak. Given that courtesy of the war in Ukraine and a lack of homegrown energy courtesy of the green lobby, it was somewhat surprising that the new regime reversed the Truss initiative. Some might say, it was a dogmatic move, to cancel the Truss initiative even though it may have been the correct thing to do, just because it came from the former Prime Minister. Of course, shares of Igas suffered accordingly, and after peaking at 110p in December are now below 20p, near to where they were at the beginning of the year.


Another somewhat volatile situation was Tintra (TNT), where the share price movements have been as explosive as the company’s EPIC code suggests. The deep technology group certainly has its fans, with the announcement in November regarding it becoming an authorised electronic institution being just what the bulls were looking for. Indeed, the stock was certainly on the front foot until the recent $10m placement facility. Once again, it will be interesting to see whether investors will have the muscle to regroup after the share price rug pull that was delivered after this announcement.

IPOs and Placings

However, those looking back at the small caps in 2022 will most likely not be focusing on the few winners, but mostly on the companies that underperformed. A key feature from the middle of the year was the drying up of liquidity in the market as a whole, and the reticence to stump up the cash for IPOs and placings. Pre the summer holidays in June and even a couple of weeks ago, it was noticeable that investors were cashing in if only to pay for those holidays. This made it all the more strange that companies still persevered at raising money for IPOs, and did not anticipate that if you wait for the third week of December to announce a placing, it may have to be deeply discounted or reduced in size.

Cash Crunch

Of course, it has been a very tough year, and unless you are a bear who enjoys seeing people losing money, yes there are those who celebrate such events, but there was overall little to cheer about. The cash/margins / rising costs crunch affected companies like DeepVerge (DVRG), DeepMatter (DMTR), (MADE), and Joules (JOUL), as after years of low costs and cheap money, management struggled to adapt to the new normal. Perhaps they will be better prepared in 2023, as lessons from 2022’s flock of black swans sink in.

Author @ZaksTradersCafe

Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.

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