Shares in Digital Barriers plc, a company founded by Dr Tom Black and the former senior management team of Detica Group plc rose a whopping 28% on their AIM debut today – a sure sign that the market is getting overheated or simply a management team that justifies a premium rating?
Digital Barriers is a newly-incorporated company, focused on the provision of specialist products and services to the $140bn global Homeland Security market.
The Admission Document reveals that the Directors of Digital Barriers believe that investment is now required to improve the digital security and surveillance technology needed to protect high-profile targets, crowded spaces and the critical national infrastructure from terrorist attacks. This requirement is reflected in the “Protect” component of the UK Government’s latest counter-terrorism strategy (entitled “Contest II”), published in March 2009. This is a broad segment that includes both the public and private sector and is currently served by a highly-fragmented supplier base. The Directors believe that, historically, there has been limited central government investment or co-ordination in this area.
The key issue for many will be how the public sector is going to pay for all this new security!
The Group raised a net £19m issuing 20m new shares at a placing price of 100 pence per share. There were 24,782,500 in issue post the placing so that’s already a nice premium for a business that is currently a cash shell.
However, given Detica’s success you can see why many are happy to jump on board.
Detica listed on the Official List in April 2002 and then grew its market capitalisation from approximately £87 million to approximately £325 million on 17th July 2008. On 31st July 2008, the board of Detica recommended a takeover offer by BAE at an offer price per share which was higher than the highest quoted price of a Detica share in the period since listing and valued Detica at approximately £531 million. Detica thereby created approximately £393 million of shareholder value, resulting in a compound total shareholder return of approximately 30% per annum -quite a story!
Management expects to use the cash raised within 18 months and there is obviously the likelihood of further fund raisings. Negotiations have already begun with two target companies.
Could be an exciting one to follow!
