Small and micro cap fund Microequities launches $19 million IPO
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Micro-cap fund Microequities Asset Management has launched a prospectus to raise $19 million — valuing the fund at $106 million ahead of an expected ASX listing next month.
Founder and chief executive Carlos Gil said he expected the offer to close oversubscribed in mid-April.
“We don’t need more capital,” Mr Gil told Stockhead. “Traditionally we have had strong advocacy from clients and if they are out there advocating the strength of our investment, it makes sense that they should share in the benefits of equity.”
The float represents about 18 per cent of the fund’s shares — 23.7 million shares at 80c.
Microequitiies has $442 million under management from more than 830 investors — mainly high net worth individuals.
That’s up from starting point of $38 million and 73 clients when it was first established in 2013, Mr Gil says.
He says the fund’s three major shareholders sold down their stakes from 90 per cent to 60 per cent ahead of the float.
After the float Mr Gil will remain the major sharholder with 40 per cent.
The fund plans to pay out 70 per cent to 100 per cent of profit in dividends.
Microequities reported a profit of $9.5 million last financial year on total income of $16.1 million (including $5 million revenue plus performance fees of $10.7 million).
“Our general view as value-based investors in micro and small cap is always looking for price inefficiency where intrinsic value is much bigger than market value,” Mr Gil said.
“At the moment, there are bigger gaps than there were two to three months ago, and I think we are better placed to identify opportunities than the average retail investor just picking out a price-earnings ratio.”
Along with the usual risks associated with investment funds, Microequities warns investors that “shares in microcap and smallcap companies may trade less frequently and in smaller volumes and may experience greater price volatility than larger companies”.
As investors saw in the February market correction, during periods of volatility small caps “could face an illiquid securities market, thereby limiting the ability of the manager to disinvest out of positions”, the prospectus says.
“Microcap and smallcap companies may also have more limited operating histories, markets, product lines or financial resources than larger companies. They may also depend heavily on key staff.”
Microequities will compete with boutiquefFund managers such as K2 Asset Management, Acorn Capital, Contango and Smallco Investment Manager.
The offer opened last week and is due to close April 18 ahead of an expected listing April 30.
More information: www.microequities.com.au.