With a market cap of only £55m at time of writing, Concha (LSE: CHA) sits under the radar of most investors. However, the company is one of AIM’s best performers this year, as year-to-date the Concha’s shares have jumped more than 2,000%.
Still, Concha is loss-making and the company, which bills itself as an investment company, focused on the mobile, internet, sports, social media, digital and technology space has not yet made a game-changing investment.
Nevertheless, after falling by around a third today, should investors take advantage of declines and buy in?
Today’s declines
Concha’s shares may have fallen by more than a third today but there’s little in the way of news to fuel further declines. The only news that has been released by the company today, regards the excise of 2m warrants, generating gross cash proceeds of £80,000. This warrant excise is part of the company’s fund raising package, which was announced alongside full-year results.
The package included the placing of 100m ordinary shares at 4p per share, representing 7.3% of the current issued share capital, with new shareholders to raise £4m. Additionally, the placing also provides for warrants to subscribe for an additional 100m shares at 8p per share, potentially raising a further £8m.
These additional funds will be used to finance Concha’s next set of investments. According to Chairman Chris Akers:
“Concha is now well positioned with a strong board and much improved capital base. Given the opportunities currently under evaluation, your Board is confident of being able to consummate a number of exciting and considered investments during the course of the coming months.”
Cash and equivalents were £1.8m at the year ended June 30th, excluding funds from the placing.
Investments
So far, Concha has not had much success when it comes to investing. Indeed, the company’s first investment, Moshen, made last year, went out of business six months after Concha invested. Then the next venture, Pixcom Ventures also worked out to be a dud.
Luckily, Concha’s third investment, a 30% stake in The Works, a specialist design media company has, so far, worked out for the company. The Works reported strong double-digit growth in year on year revenues this year and the firm’s pipeline of business is strong.
Private equity and venture capital investors usually experience plenty of failures before they pick a home run, so Concha’s record is nothing out of the ordinary.
And the company remains on the lookout for attractive opportunities. The recent fundraising will help Concha take advantage of the “exciting opportunities…which in Concha’s view have a real opportunity to secure a dominant position within their niche area of activity within the medium to long term…”, according to management.
As with all venture capital funds, if Concha makes the right picks, the sky is the limit for the company.
What to do?
The problem with venture capital businesses like Concha is that their success is usually pretty binary. Either they make an investment that becomes the next Facebook, or they crash and burn. So, with this in mind, today’s declines may present an opportunity to buy, but only for investors with a high risk tolerance.