There’s something of a revolving door down at Euronext Dublin these days: Yew Grove Reit is shipping out as HealthBeacon is moving in. Both are small caps, one entering with unbridled enthusiasm, the other departing disillusioned.
While the companies operate in very different sectors, there is a lot for HealthBeacon to learn from the property company’s experience on the market. Yew Grove raised just €75 million when listing in early 2019. It had hoped to raise up to €200 million. Instead it looked to raise the funds to build scale as it went along. It failed.
Each time it went back to the market it raised less and less. Despite offering a decent yield to investors, and buying property, it is being taken off the market at roughly its flotation price.
HealthBeacon, a medtech business, is raising just €25 million in its initial public offering (IPO). It develops products for managing injectable medications for patients in the home. It is great-looking technology in a fast-growing market.
HealthBeacon reckons that it can increase the numbers using its products tenfold within the next two years, and has inked an exciting distribution deal with Hamilton Beach, a large American domestic appliance company.
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There is plenty of smart money following the founder Jim Joyce on to the market. The wealth managers Elkstone, an existing investor, and Canaccord Genuity Wealth Management are subscribing for stock. Larger existing investors, including Bill McCabe’s Oyster Capital, are not selling. That is a vote of confidence.
Joyce says he opted for a public listing over private equity because he wanted access to long-term capital. “Venture capitalists look for a return of capital in five to seven years,” he adds. The company also has “a globally scalable technology solution”. If it wants to look at acquisitions, it can raise finance more efficiently through the public markets. Alas, Yew Grove thought the same way.
The IPO is not cheap — it will cost €2.1 million to raise €25 million — but it will allow the company to raise money more efficiently in the future, Joyce told The Sunday Times recently.
Yet there are hurdles. It is a small-cap stock, valued at €100 million, and has a relatively small free float. It can be difficult for smaller cap stock to be heard, and for brokers to make a market in them. Finally, in the past, Dublin has been a bit of graveyard for technology stocks. It is not a place where fast-growth tech stocks congregate. The current crop, Malin and Datalex, have had a rough ride.
If there is a model for HealthBeacon, it may be Mincon, which floated back in 2013. Its performance has been solid, if unspectacular. It has a good shareholder base, led by Fidelity.
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Yet Mincon was a profitable business when it debuted. HealthBeacon had revenues of €1.2 million last year and made losses of €3.4 million.
That is the real surprise at HealthBeacon. It is floating at a very early stage in its development. If it achieves the projected hockey-stick shaped rise then it will be one of hell of journey for investors. If it doesn’t then it could be a very hard slog.
Final twist for Serpentine saga
People have served less time for murder. The 35 investors who have spent 15 years as owners of the rear extension of the former AIB headquarters in Ballsbridge have just got a release date. A happy release it is too.
The US private equity company Blackstone is to buy the so-called Serpentine extension for a reported €400 million, tempted by a big rent and a strong covenant from Facebook, its forthcoming tenant.
The vendors are the Serpentine consortium, who bought the same building for €375 million in 2006. These were 35 businesspeople, mostly clients of AIB and Goodbody Stockbrokers. Among them are Donal Ring, founder of Munster Joinery; Tomás Garvey, a Kerry Supervalu owner and hotelier; and the Elverys owner John Staunton.
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When the consortium bought the building the vendor, AIB, made a profit of nearly €160 million. The deal was hopelessly overgeared with €300 million of debt, provided by AIB, of course. This was backing brave, 2006 style. Almost all of the bank’s rent went back to its own coffers in interest on the consortium loan. The investors were plunged into negative equity. It took all this time for the investors to get back in the money. If the reported €400 million is achieved then the investors will have made a return. With a fair wind, they might even have doubled their money, or close enough, a decade and a half on.
