Future Funding Options and ROI
Future Funding Options and Return On Investment
Future Funding Options
The Founding Shareholder in the Company’s initial PPMs and the Founding Directors have indicated that they are willing, in principle and depending on the particular investment opportunity and if requested by the Company, to make available to the Company up to £25m of debt funding.
Unless other terms are negotiated in respect of any particular investment opportunity, they shall generally provide debt funding on the following terms:
- for a term to be agreed with the Company at the time of the particular debt funding, subject to a minimum term of 12 months;
- interest at the rate of 5% per annum above the published annual rate from time to time of the Bank of England. Interest will be paid at the end of the funding term;
- a payment equal to 50% of the Company’s profits arising from the disposal or exit, in whole or in part, of the particular project funded by that particular debt funding.
There shall be no obligation on the part of the Company to seek funding on the above terms and so far, with the funding raised and cash generated by the Company, there has been no need for the Board to call on this debt facility to meet its investment goals.
Now that the Board sees a clear opportunity to target £80+ per share value with its first IPO alone, it is the intention of the Company to issue a new Private Placement Memorandum at £25 per share to raise up to £25m. This equity fundraising is an alternative to using the above debt facility to avoid losing 50% of the potential profit from transactions that would otherwise utilise this debt facility.
The anticipated equity fundraising is not a requirement for the Company to execute its plans, as it has the above debt facility available to it. The Private Placement will, therefore, be launched at some point in HII 2017 with a series of investor days. The Company will take partial funding as it is raised and it is intended to keep the Private Placement open until one of the following three events occurs; the full £25m is raised, the end of 2018, or the Board no longer feels it is in the best interest of shareholders to consider issuing shares at £25 per share.
The Company will continue to focus its fundraising strategy on High Net Worth Individuals, Private Offices, Investment Funds and other Sophisticated Investors as all prior fundraises, conducted by the Company, have been significantly oversubscribed.
Return On Investment
This Private Placement will afford new and existing investors the opportunity to invest in what is a growing business with the potential, both organically and via the Company’s proven acquisition methodology referred to above, to develop to a level that, like the Founding Shareholder’s previous ventures, has the potential to provide a very significant ROI for our investors.
In recent M&A transactions, shares were issued at £15 per share, implying a current fully diluted market cap of c.£150m or c.£250m at the intended £25 per share price.
This valuation of the business (c.£250m) compares very favourably for investors, in the view of the Board, set against the valuation by Investec Bank of The Innovation Group (TiG), one of the Founding Shareholder’s prior ventures, at the time of its IPO. When comparing the two businesses at this stage in regards to management team, client base, technology platform, M&A strategy and identified market opportunity the Quob Park Estate business is, in the view of the Board, far more advanced in its development.
TiG completed 28 acquisitions in the 18 months following its IPO and grew revenues, in combination with significant organic growth to over £100m per annum.
TiG also reached a market cap of over $2bn at peak within the same 18 month period, demonstrating the track record of the Company’s Board in achieving this level of rapid growth with a less developed proposition than the Company has at this stage.
Quindell, the Founding Shareholder’s and Board’s other main prior venture, also grew rapidly, both organically and via acquisition, demonstrating even greater growth in a shorter time scale than TiG. This further underpins the growth and value creation track record of the Company’s Board.
With £25 per share being the proposed price for equity under the new Private Placement Memorandum, this still provides for significant ROI for our investors, with a targeted rapid growth in value per share to £80+ from the Company’s first IPO alone, with multiple IPOs or disposals of a significant scale anticipated by the board from 2022 and beyond.
Upon achievement, this would imply an initial, greater than 200% ROI for new investors, with the potential for an even greater ROI to be targeted beyond 2022, dependant on the mix of debt and equity utilised by the Company and the level of success in the execution of its growth strategy.