Baby Ace: SMALL CAP MOVERS Online boost as fashion group boohoo.com makes sparkling debut on AIM catwalk

Friday, March 14, 2014

SMALL CAP MOVERS Online boost as fashion group boohoo.com makes sparkling debut on AIM catwalk

By

Jamie Nimmo, Proactive Investors

Online fashion group boohoo.com strutted its stuff on AIM on Friday, becoming the latest retailer to make its shares available to the public

Those lucky enough to get a piece of the action were rewarded with a 60 per cent share price rise within minutes of trading.

The shares went on offer at 50p, but soon raced up to 80p in a float which raised £300million. The funds are earmarked for an accelerated expansion programme, as well as repaying convertible loan notes held by existing shareholders.

Another dot-com bubble? Boohoo is the latest among a raft of social media sites and online portals to have floated on the stock market.

Institutional backers, such as 7 per cent shareholders Odey Asset Management and Old Mutual, were quids in, not to mention co-founder and joint chief executive Mahmud Kamani, who made a cool £240 million from the listing.

Boohoo.com follows in the footsteps of retailers Poundland and Pets At Home, which joined the main market this week. House of Fraser and BM Bargains are also tipped to go public soon.

Not everyone in the City is convinced boohoo.com can replicate ASOS’s sales and subsequent stock market success.

ASOS’s shares have risen more than 2,000 per cent in the last five years, valuing the company at over £5billion.

‘The question is whether Boohoo’s fashion-conscious 16 to 24-year-old audience will offer enough revenue-growth potential to match the likes of ASOS,’ said Jasper Lawler, Market Analyst at CMC Markets. ‘Youth fashion tastes are fickle and subject to change.’

As boohoo.com shows, AIM stocks can make big gains, outstripping their larger counterparts on the main market. They are however considered on the whole to be riskier investments.

So a double dose of concerns about the global economy this week saw investors lose their appetite for penny shares and err on the side of caution.

The culprits were concerns over China’s growth and the standoff between the Ukraine and Russia.

The FTSE AIM 100 index fell 3.4 per cent to 3,935 as risk was ‘taken off the table’, to use a term favoured by traders.

AIM is totting up quite a list of big name constituents, but one of those, Fyffes, will soon be leaving.

That’s because the Irish firm is merging with America’s Chiquita to create ChiquitaFyffes, the world’s biggest banana supplier.

The deal should be completed by the end of the year, forging a group with $4.6billion in annual revenues.

Fruit frenzy: The merger of Fyffes and Chiquita will create a business selling more than 160 million banana boxes a year, as well as melons and pineapples

Gulf Keystone Petroleum, which feels it has outgrown AIM and is moving to the main market, fell out of favour with its thousands of followers after an independent assessment of its reserves and resources in the Kurdistan region of Iraq disappointed.

A total of 12.5billion barrels of gross oil in place were confirmed in the report, which is well shy of previous estimates in the order of 19billion barrels.

Gulf Keystone described the report as ‘conservative’, but investors were sceptical, sending the share price down 40p to 107.9p this week.

The company is now valued by the market at less than £1billion, more than half what it was worth when it won a litigation case in September, which gave rise to hopes of a takeover.

Looking at some of the smaller names on AIM, Hummingbird Resources shares jumped 14p to 60p after a major upgrade to the quality and size of the gold resource at its Tuzon deposit at its Dugbe 1 project in Liberia.

Sirius Minerals welcomed institutional buying in last week’s oversubscribed placing from the likes of Jupiter Asset Management.

Demand for the fundraising was greater than expected and the company, which is hoping to develop the York Potash project, managed to raise £43million.

The addition of warrants will provide it with an extra £32 million if it can get the necessary environmental clearance, which is the biggest hurdle to production.

North Sea oil group Independent Oil Gas suffered a bout of profit taking after last week’s surge and slipped 8p to 33.8p.

Savannah Resources lost 2.6p to 10.6p despite more testwork confirming the Jangamo project in Mozambique plays host to a ‘major heavy mineral system’.

The optimists meanwhile lifted shares in Albemarle Bond 5.5p higher to 12.25p on hopes the embattled pawnbroker could yet avoid going under.