ASX data centre operator NextDC (ASX:NXT) yesterday became the latest large cap company to back a small cap.

It is buying a 19.99% stake in Sovereign Cloud Holdings (ASX:SOV) (AUCloud) and will pay $12.4 million as part of a $34 million capital raising.

AUCloud listed on the ASX nearly a year ago and offers cybersecurity services targeting the Australian government, the Defence Force and critical national industries.

Like NextDC, SOV also has a link to tech entrepreneur Bevan Slattery, having been one of his investee companies from its seed funding days – although it is unclear if he still has a stake.

NextDC’s boss Craig Scroggie, who succeeded Slattery back in 2013, said the company was well positioned to benefit from the trend towards sovereign Infrastructure as a Service (IaaS) cloud and high security solutions.

AUCloud’s boss Phil Dawson also said the company would benefit from the deal.

“Our strategic partnership with NextDC, a leading provider of premium data centre facilities, will provide access to a powerful national network of 1,500+ enterprise customers and 830+ channel partners,” he declared.

“This equity raising capitalises AUCloud to extend its platform footprint into Brisbane, Melbourne and Adelaide and expand its customer reach into the large security conscious enterprise market.”

NextDC shares slightly fell after the news but it is well ahead of its 2010 IPO price of $1 per share. AUCloud shares meanwhile were halted as the capital raising occurred.

NextDC (ASX:NXT) and Sovereign Cloud Holdings (ASX:SOV) share price chart


What other small caps have large caps invested in them?

Sovereign Cloud Holdings (ASX:SOV) is not the only small cap to have a large cap backer.

It is common for spin-off companies to retain ownership from their original companies.

But there are other independent tie-ups.

For instance online shopping rewards platform Cashrewards (ASX:CRW) has ANZ Bank (ASX:ANZ) – specifically its innovation and investment arm 1835i – as a 19% shareholder.

And just last month it made a takeover bid for the remaining shares less than a year after listing.

A2 Milk (ASX:A2M) has a 19.8% stake in Synlait (ASX:SM1), a fellow Kiwi company which supplies it with milk ingredients and powders.

And investment fund Touch Ventures (ASX:TVL) has Afterpay (ASX:APT) as a 24.3% stakeholder.