It isn’t a fluke that many of the world’s fastest growing and innovative companies - Uber, Google and Facebook to name just a few - are American. This is because US investors recognise the value in backing early-stage businesses that possess ‘disruptive technologies’ and address large unmet needs.
Finally it appears the UK is catching up. This morning Kromek, a global pioneer in next generation radiation detection, announced it was intending to raise up to £11m at 25p (or c. £10.4m net); via an over-subscribed £9m placing and a £2m open offer – the latter being predicated on 2 new shares for every 27 held.
This looks a smart move to us, since based solely on ultra-conservative assumptions (see below), we estimate there is 40% upside on the placing price versus our ‘worst case’ price target of 35p/share - and a possible 3-fold return available compared to our more optimistic forecast of 75p/share. Encouragingly, 4 directors (including the CEO) and several new blue-chip institutions participating in the placing/offer; thus providing a major endorsement of Kromek’s prospects.
With regards to timings, the proposed fundraise is subject to approval at a General Meeting with the 44m of new shares (or 29% of the enlarged group) expected to be issued no later than 18 August 2015. The proceeds will be used (among other things) for further product development (c. £3.5m), sales & marketing (£0.5m), and importantly steel-plating the balance sheet in order to demonstrate to all interested parties (especially OEM and government bodies) the firm’s ongoing financial strength.