The group, which has stakes in Yorkshire spin-outs including Avacta, Tissue Regenix, Tracsis and Getech, yesterday revealed plans to ask shareholders for £53.3m after costs through a placing and open offer.
The fundraising, IP Group’s biggest to date, will be used to increase the rate of investment in its portfolio and spin out new companies.
Chief executive Alan Aubrey recently told the Yorkshire Post the company plans to float a couple of spin-outs over the next year.
“A number of the group’s portfolio businesses have made excellent recent progress towards achieving key commercial milestones,” he said in a statement yesterday.
“This proposed equity raise will enable the group to maintain or increase stakes in these post-seed opportunities whilst also increasing its overall rate of investment.
“Strengthening the balance sheet in this way provides the group with greater flexibility to lead investment rounds whilst decreasing its reliance on external capital, thereby ensuring that we are able to maintain significant minority stakes in the most promising opportunities.”
The group helps spin out and grow companies from 10 universities including Leeds and York. It also has a stake in its smaller business incubator rival, Sheffield-based Fusion IP, which has exclusive relationships with Cardiff and Sheffield universities.
The share issue will increase IP Group’s share capital by 43 per cent. The issue of 110m new shares at 50p each is a six per cent discount to IP Group’s closing price on Thursday.
Shares in the company closed up 0.5p at 53.75p yesterday.
Mike Townend, IP Group’s director of capital markets, said 14 institutional shareholders took part in the placing, with at least three of these new investors.
“This has not been an easy exercise but we’ve been pleased with the reaction we’ve had from existing and new shareholders,” he said. “We think it’s an endorsement of the business.
“We look at this in some respects as a company growing up.”
He said the placing was driven by the opportunities IP Group is seeing in its portfolio, rather than any specific upturn in market sentiment. It had 63 portfolio companies at the end of last year, of varying degrees of maturity.
“We see great opportunities within our portfolio to invest, and also within our university deals. We’ve always invested during the down years.
“The difference is now the portfolio has matured and they are bigger companies.
“We’re keen that as these companies grow and become more mature, that we’re not diluted.”
IP Group is issuing 110m new shares to institutions and another 10m through an open offer. The deal is fully underwritten by Numis Securities.
The company said it is on the look-out for new university partnerships, which give it access to academic research with business potential. Mr Townend said it is in early talks about this with a couple of institutions, but declined to name potential partners.
IP Group added raising the funds will give it firepower to invest where others may struggle.
“The UK continues to produce a wealth of potentially world-class intellectual property from its universities and other research-intensive institutions,” it said.
“In the current economic climate, funding for higher risk, early stage businesses continues to be constrained and trading circumstances for small businesses remain difficult.
“Against this backdrop... the group has an increasingly competitive position.”
IP Group’s focus is on five sectors: energy and renewables, medical equipment, pharmaceuticals and biotech, chemicals and materials, and IT and communications.
It was established in 2000 and moved from the Alternative Investment Market to the main market in 2006.
Shareholders will vote on the placing and open offer on June 21 in London.