Pre-IPO market segment ripe with opportunities for discerning investors


Angela Ashton

In an environment of low interest rates and returns, the pre-IPO and small cap equities sector offers high growth opportunities for investors, according to new specialist alternatives Research firm Evergreen Ratings.

“The listed market clearly offers attractive growth opportunities but it is the pre-IPO private market that is gaining more attention. The performance of the pre-IPO market is broadly linked to the strength of the underlying equity market and investor appetite for equity capital market and IPO transactions.

“The returns generated across the pre-IPO market have been very strong and continue to attract specialist fund managers to this area,” notes Angela Ashton, founder and Director of Evergreen Ratings.

One of the fund managers in this sector is Bombora Investment Management which offers the Bombora Special Investments Growth Fund (“Fund”) investing in Australian and NZ based pre-IPO enterprises and listed small caps.

This Fund has recently scored Evergreen Rating’s top rating of “Highly commended”.

Evergreen Ratings note: “The Fund returned +29.8% in the 12 months to 31 December 2020, and has doubled in value since its launch less than three years ago, currently holding $78 million in funds under management.

“It is designed to capture early-stage growth from Australasian companies that use technology as a disruptor across sectors that cover technology, telecommunications, media, healthcare and financial services. The asset allocation model of 40-50% listed companies, 40-50% pre- IPO companies and 10-20% cash provides access to both high growth businesses and a significant level of liquidity not normally found in Bombora’s small peer group.

“Diversification is paramount to the decision making and an essential element behind portfolio construction and management.”

The Evergreen report notes Bombora Investments Management (BIM) comprises a team of experienced investors and specialist advisors, headed by Mike Hill, who provide advice to fund companies on capital raisings and operational strategy and a range of advisory services including governance, reporting, management structure, recruiting and mergers and acquisitions counsel.

“The Manager’s senior members have a significant portion of their wealth invested in the Fund. This co-alignment of interests with external investors provides significant comfort to Evergreen,” notes the ratings report. The alignment of BIM with investee companies allows those companies to benefit from BIM’s IPO experience.”

Investee companies in which Bombora has aided in taking to public markets prior to the launch of the fund include:

Rhipe (ASX: RHP) a leading cloud software licensing expert in the APAC region; litigation funder JustKapital (ASX :LAW), Livetiles (ASX:LVT), developer of digital workplace platforms; DMC (ASX:DMC) Design Milk, a luxury designer goods online market place; Janison (ASX:JAN) a digital education provider; ACROW (ASX:ACF) provider of formwork to and construction industries, and Pacific Knowledge Systems (ASX:PKS) provider of automated decision making process in healthcare organisations

A recent investee company pre-IPO capital raising involving Bombora was a 2020 raising for software content company, ORBX, that specialises in developing flight simulation graphics.

Mike Hill, Managing Director and Co-CIO, adds: “The December 2020 quarter was another busy period for us, with multiple new pre-IPO investments securing additional funding including Bike Exchange (ASX:BEX), MadPaws Limited (ASX listing ~ March 21), Nviso Limited (ASX listing ~April 21) and Mobecom Limited (ASX:MBM). We also successfully added new listed securities, participated in a series of IPOs and divested overweight positions across the portfolio.”

“The pipeline of opportunities is significant and we now have a number of our earlier investments which will hit the ASX boards through the first half of CY21. This is an exciting time for the team,” he says.

Gregg Taylor, Co-CIO Listed Equities notes: “Bombora continues to provide attractive co-investment opportunities to our Fund investors enabling enhanced returns in a very strong pipeline of new transactions.

“The outlook for the Bombora Fund continues to be positive across all segments of the portfolio and the whole team is working hard to guide these emerging growth companies as they execute operational objectives.”

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