Firm backing for growth funding and acquisitions
Thursday 13 Jul 2017 Author: Steven Frazer

UK-quoted technology businesses are seeing sustained popularity with investors willing to back several fresh funding rounds designed to bolster growth.

This positive market sentiment towards the sector is being backed up by positive share price returns, with UK technology indices outperforming wider stock market equivalents over the past three and 12 month periods.

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So far in 2017 about £54.5m of new cash has been raised from investors through initial public offerings (IPOs), according to London Stock Exchange data.

But nearly £500m of fresh funding has been found to back acquisitions through secondary share placings, including the £70m raised on 7 July by digital buying platform business Proactis (PHD:AIM) to pay for its rough £99m merger with US-based spend management solutions provider Perfect Commerce.

‘The sizeable and oversubscribed placing to fund Proactis’ deal supports improving sentiment within the capital markets,’ says Rob Warensjo, an analyst at IT consultant Megabuyte.

These cash call figures do not include the 1 June IPO of Alfa Financial (ALFA), the asset management software supplier that raised no new money. It floated with a £975m market cap, a valuation that has since soared to close on £1.4bn.

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Impressive performance

Over the past 12 months the UK tech indices averaged a 34.6% return, according to data supplied by FactSet. That is solidly ahead of the UK Main Market indices average of 22.6% during the period to 5 July.

This relative success for technology markets may come as a surprise given the political shocks during the past 12 months or so. These include the UK’s decision to leave the EU, Donald Trump’s presidential victory and Theresa May’s surprise general election result.

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Notably, that is also ‘robustly ahead of the 22% average return of the Nasdaq Composite and the S&P 500,’ reveals Stockdale Securities technology analyst Brendan D’Souza.

‘In our opinion, no technology sector performance is complete without comparing it to the happenings in the US market,’ states D’Souza.

According to the analyst’s data, the technology-heavy Nasdaq Composite and the S&P 500 posted an average return of 11.5% since the start of 2017, outperforming the UK tech indices’ average of 10%.

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