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Shells Part Two –Black Holes to Supa Novas
A shell exists to become the vehicle for an entrepreneur to grow a real business. This involves the real business being reversed into the shell via an RTO, Reverse Takeover. The corporate finance work to do this is considerable and any short cuts lead to increased expense and delays.
It’s an attractive proposition as it creates something from very little; You invest in a listed cash shell worth a bit more than the cash and the shell team agree an RTO, which brings in earnings and a business plan that creates an uplift in value. It is however a process not without ‘challenges’ and there is a suspicion that Shells are of more value to financial advisors and entrepreneurs than being a genuine asset class to small cap investors.
Below are five available standard listed shells and six shells, which after announcing RTO talks, are suspended pending RTOs. A Standard listed shell has longer to complete and RTO than Aim listed ones. The time needed to complete the ‘legals’ is often over three months which is making shell investing less attractive.
Safe Harbour (SHH) Mkt Cap £36.8m, 135p
Raised £22m net at 120p a share in March 2018, having previously raised £10m. After overheads and costs there was net cash of £30.5m.
Seeking B2B business distribution or business services companies.
Backed by Marwyn
Headed by former Bunzl executive Rodrigo Mascarenhas and Avril Palmer-Baunack who is involved with BCA.
Wilmcote (WCH) Mkt Cap £24.4m, 117p
Raised £15m at 120p a share in August 2017. Had previously raised £10m at the same price.
Seeking chemicals acquisitions
Backed by Marwyn
No longer in discussions to buy Arysta LifeScience
Limitless Earth (LME) Mkt Cap £2.9m,4.2p
A placing at 3p a share raised £3.05m in May 2014. At the end of July 2017, NAV was £2.34m including cash of £791,000 and investments of £1.54m.
Limitless Earth intended to invest in businesses that will benefit from changing demographic factors with and the initial focus was Europe.
The current focus is cleantech, life science and technology businesses. Investments include Saxa Gres, an Italian industrial waste recycling and tile making business.
Spinnaker (SOP) Mkt Cap £1.14m 3.8p
Cash £1.18m
Looking for deal in the energy or industrial sectors
The directors previous shell was less than a great success
AIQ Limited (AIQ) Mkt Cap £15m 30p
Cash £4.5m
Looking for e commerce deal China focused
The premium to cash is far less than it has been but still difficult to justify.
Suspended Pending Deals
Derriston Capital (DERR)
Mkt Cap £2.85m, Cash £1.9m – Suspended May – pending a deal
Fandango (FHP)
Mkt Cap £0.9m- Cash £0.3m-Suspended May pending a deal
Zamano (ZMNO)
Mkt Cap £4m, -Cash £5m – Suspended March – pending a deal
Contango (CGO)
Mkt Cap £1.61 m – Cash £1m – Suspended Dec 2017 pending a deal
Path Investment (Path)
Mkt Cap £1.5m -Cash £1.4m Suspended Dec 2017, Deal pending moving to AIM
Rockpool (ROC)
Mkt Cap £1.14- Cash £1.2m – Suspended Nov 2017 pending a deal
Stranger (STHP)
Mkt Cap £2m – Cash £0.9m – Suspended Aug 2017 pending a deal
