Hybridan Small Cap News – March 2025

Hybridan Monthly, 3 March 2025

Market Comment: The view from a Broker’s desk

PISCES – shooting the lights out or shooting ourselves in the foot?

In the latest bid to revitalise the UK’s IPO pipeline, the Government has reaffirmed its commitment to the creation of an ‘an innovative new stock market’ coined the Private Intermittent Securities and Capital Exchange System or PISCES for short.

PISCES plans to operate as a regulated platform for the intermittent trading of private company shares. It will kick off with a five-year stint in the “FCA sandbox” which allows the Government to modify the platform or disapply certain parts of the legislative framework based on market feedback. As things currently stand, PISCES is set for a May 2025 launch date.

The rationale has been reportedly based on feedback from private companies that investors require a “stepping stone” to the IPO market which will allow founders and shareholders to trade their secondary shares in a controlled and regulated environment ahead of a potential listing. It is suggested once companies (issuers) have this in place, they will feel more comfortable pulling the trigger on a London IPO.

PISCES will start off solely as a platform for private companies to trade secondary shares (a company cannot raise primary capital through the issue of new shares on the platform). Trading will occur during intermittent windows with the timing and frequency down to the discretion of the issuer. Whilst the scope of sellers will be broad; from founders; company employees; and VCs, the buyers can only be institutional investors and certain other investors who meet the criteria of being a high net-worth individual or certified sophisticated investor under the Financial Promotion Order (FPO). The general retail public will not be allowed to participate.

Lots of outstanding issues are still up for debate during the consultation process, and we won’t have a clear view until we see a live deal in action. These include, in the absence of a heavily regulated public market style market abuse regime, how will company information be verified to ensure investors are protected and directors stand by what they are saying to investors? How does the price discovery process work? In an IPO or placing, it is usually facilitated by a broker and based on indirect price discovery, book build between issuer and investor to ensure a fair market price has been established. Allowing the issuer alone to opine on the value of their company can be problematic and lead to artificial valuations when it comes to a potential IPO.

Whilst the supporters of PISCES acknowledge the abundance of private crowdfunding platforms, they believe current systems do not cater to the institutional investor who have deeper pockets than your typical audience on a crowdfunding site. Looking back during 2024, there was no shortage of secondary transactions and liquidity events for investors in private companies. Namely, Vinted (€340 million), Monzo ($190m), Moneybox ($70m), Revolut ($500m), and GoCardless ($200m). With such huge numbers being traded in the

secondary private markets already, one could ask where is the gap that PISCES is looking to fill?

A UK broadsheet recently reported that PISCES has received criticism from the Venture Capital industry, who as institutional investors would be a key audience for the platform. The article found that venture capital and private equity executives branded the platform as unnecessary and likened it to a “new version” of the UK’s “ailing junior AIM market”. The newspaper spoke to a leading VC who claimed the new system would be problematic for venture capital backers because trading of shares on private exchanges would assign a listed price to their portfolio companies that would “likely be low and possibly volatile”.

To counteract this criticism and for PISCES to gain momentum, it now needs companies and investors to back the initiative publicly to ensure widespread adoption and buy in from the market. We could see a raft of exciting pre-IPO companies using PISCES as a stepping stone to a full IPO. There is the worry that companies on PISCES could decide to stay private permanently or even encourage companies to delist from the public market and just quote their shares on PISCES.

Some of the criticism is certainly warranted, mainly around the platform’s focus on attracting the next block buster IPO rather than supporting growth companies desperately in need of primary capital who list or quote their shares to facilitate that. It could also put strain on the relationship between public and private markets, although this shouldn’t be the case as private and public markets have a symbiotic relationship. IPOs work incredibly well when there is a ‘partial’ sell down of private equity shares at IPO and then in subsequent rounds, for instance Darktrace provided a profitable exit for private equity house giant, KKR.

The jury is out on PISCES. The IPO pipeline for London has been in a period of drought for some time and if the initiative demonstrably turns the IPO tap on again, then all the naysayers will be silenced.

We at Hybridan like imaginative ventures, new ideas, and change is rarely a bad thing, and intend to be sitting up, listening closely and be – optimistic about where PISCES may take the UK economy.

By Niall Pearson

Company Newsflow: Our deeper reflections on recent corporate news

APTA Smelling Success

SSTY Discount to branded value

Aptamer Group 0.40p £7.97m (APTA.L)

Price	Results	Top 3 Shareholders	Value
0.38-0.42p	Y/E: June, report October	Pathcelerate 6.88%	12 month + Runway
Spread: 10.55%	Interims December, report March	Nicholas Slater 6.48%	High Value Target
52 week High/Low: 0.9p /0.25p		Crux Asset Management 5.21%	Licensing Deal

Source: Alpha Terminal, and Company Website at

https://aptamergroup.com/investors/shareholder-information/

Aptamer is a life sciences Company developing custom affinity binders through its proprietary Optimer platform which enables new approaches in therapeutics, diagnostics, and research applications. Its Interims to December are reported on Tuesday 11th March. The Trading update anticipated revenues of £0.7m, compared to £0.3m in the prior year. Its Fee for Service work benefits from development projects with five of the top 20 pharmaceutical companies, of which 4 represent repeat business. APTA is also progressing potentially lucrative licensing discussions with multiple customers regarding developed assets for a range of applications.

The Unilever partnership with a novel active ingredient for deodorants is progressing to human trials and treating ‘smells’ in deodorant products; it is a market worth $21bn. There is a partnership with AstraZeneca on an Optimer delivery vehicle validated for potential precision medicines in fibrotic liver; this addresses an unmet need in a growing $14.7bn global market. There is also significant progress with Optimer binders to Neuro-Bio Ltd’s innovative Alzheimer’s disease biomarker flow test, potentially disrupting a global diagnostics market worth $4.1bn.

In the 12 months to June revenue was £0.8m with an EBITDA loss of £2.2m and net cash of

£0.9m, although since the year end June 2024 £2.6m was raised at 0.2p. The support of key industry players reinforces its position, and management reports it is steadily advancing towards its revenue and potential licensing goals.

Hybridan Comment: Commercial progression is expected at the Interims, whilst increasing revenue extends its estimated 12 month cash runway.

Safestay 20.5p £13.3m (SSTY.L)

Price	Results	Largest Shareholders	Value
20-21p	Y/E: December, report June	Pyrrho Investment 29.30%	Good Operators
Spread: 5%	Interims June, report September	BGF Investment Management Ltd 18.16%	Efficient use of Capital
52 week High/Low: 27p /18p		Chelverton Asset Management 6.72%	Deep Discount to NAV

Source: Alpha Terminal, and Company Website at https://www.safestay.com/aim-rule- 26-contact-info/

The European Hostel Group’s Trading Update for the Y/E December 2024 showed revenue growth of 2% to £23.5m, with a slightly lower EBITDA of £6.5m from

£6.8m. Its vision is to build a branded network of hostels that blends comfort, affordability, and camaraderie. Its forward Bookings are 27% higher at £4.7m and occupancy rates continued to strengthen to 75.2%, which is a 3.8% increase year on year. In early January, as part of the multi-year partnership, Safestay moved its 20-strong Europe-wide hostel portfolio of 4,000+ beds onto the Cloudbeds Enterprise Platform which is expected to drive financial and operational efficiencies.

The Average Bed Rate of £21.40 decreased 10% in line with broader pricing pressure. This was however almost made up through a KPI of revenue per available bed, which remained robust at £18.56 reflecting success in driving overall revenue per guest with ancillary services, mainly food & beverage sales which increased 26% during the year. Its debt has been refinanced with HSBC to a £16m five-year Term loan with a £2.5m Revolving Credit Facility. The interims reported a 17.2% increase in net asset value per share to 49.8p and a branded profitable hostel business you could expect to be worth a premium to assets.

The fragmented and growing global hostel market is expected to be worth $8.9bn annually by 2027. During FY24, the portfolio was expanded, with new properties in popular European travel locations (Costa Blanca and Cordoba, Brighton; and Budapest). A new hostel was opened in Edinburgh following the acquisition of the site in 2023. It will continue to actively appraise expansion opportunities across both existing and new markets, including acquisitions as well as less capital-intensive routes to market, such as franchising partnerships.

Hybridan Comment: The brand/asset building journey started in 2011 and we speculate that a larger leisure business could as some stage seek to acquire it perhaps at a premium to NAV. In the meantime, business may continue to improve.

House Report: News from a house stock

Petards Group * 8.25p £5.01m (PEG.L)

The Trading Update for Y/E December 2024 included June’s £2.85m acquisition of Affini. Its contribution will be affected by a customer delaying a significant project that led to lower- than-expected revenues in December. Its mix of revenues was also different from that expected, with higher margin engineering services work being delayed into 2025. The Affini acquisition added a fourth business vertical for Petards. It provides critical wireless communications solutions to the transport, blue light, energy, defence, and construction sectors, as well as the possibility of cross-selling opportunities

Clients are generally being challenged by external events, but rail and defence businesses improved in H2 and there is a significantly increased order book. In February, its subsidiary, QRO Solutions, won an order worth over £0.4m for in-vehicle ANPR systems (Automatic Number Plate Recognition). This order has been placed by an existing UK Police Force customer.

The cash performance was ahead of expectations, with total net debt of c.£1.6m, including the acquisition and is better than forecast. There is headroom in the £2.5m overdraft facility, so there should be sufficient financing.

Hybridan Comment: As Affini’s delayed orders are fulfilled, the organic growth seems set to resume.

Updates/Events: What we consider to be notable updates and anticipated events

Feedback 17.75p £7.78m (FDBK.L)

Interims to November 2024 were reported from this clinical infrastructure specialist service provider to help clients make better and faster decisions. Its Revenue increased 3% to £449k, with an EBITDA reduction in losses to £1.43m from £1.67m in the prior period, and a lower Loss before Tax to £1.85m from £2.1m. Net cash was £7.26m after raising £6.1m at 20p during the period. A collaboration with Vertex broadens the product functionality and lengthens the global reach, for example with revenue opportunities in India. Its bleepa product approval for reimbursement through the Elective Recovery payment mechanism is pivotal. There is a sales partnership with Moorhouse Consulting, which should speed up the roll-out. An MOU was signed with primary care solutions partner and an NHS Trust to pilot a novel Neighbourhood Diagnostics Solution.

Hybridan Comment: Our initial report was at 20p in Hybridan’s Monthly in December 2024. There has been a lack of meaningful revenue progress, but it seems a matter when and not if.

Croma Security Solutions Group 85.5p £11.7m (CSSG.L)

The innovation and service-focused security solutions provider reported its Interims to December 2024. Revenue improved 4% to £4.6m, with PBT up 26% to £0.56m. There is

£4.2m of cash following a disposal, with a further £2.5m due within 18 months. The Company intends to declare an increased dividend with the FY25 results. Good demand for its security products was reported from education, utilities, health, and leisure sectors, with a mix of both repeat and new business. The strategy is to accelerate the organic growth with acquisitions and there is a pipeline of potential deals to acquire independent locksmiths. The target is to acquire 3 to 5 shops per year, then transform them into full-service security centres with an expanded product offering, improve operational efficiencies, and enhanced profitability. The Chairman is confident this well drive sustainable long-term growth.

Hybridan Comment: Initially reported on in Hybridan’s Monthly in December at 82.5p, the price still seems to ignore the possibility of successful acquisitive growth.

In the news in March

Seraphim Space Investment Trust 57p £137.6m (SSIT.L)

The world’s first listed SpaceTech investment Company reports its Interims to December 2024 on Thursday 13 March. The NAV for Q1 to September reported to have declined 2.3% to

£222.9m, which is 93.96p per share. This was due to the losses on foreign exchange offsetting the investment gains from the likes of their investee company NASDAQ listed AST Space Mobile, which had more than doubled in its valuation. Based on management projections, 71% of the portfolio is categorised as having a ‘robust cash runway’, with 58% fully funded and 13% funded for 12 months from October 2024. As at the end of September 2024, the cash balance was £24.9m, with only £12.5m of the portfolio invested in publicly listed companies.

Hybridan Comment: The share price has improved from approximately 50p in mid- February and is still at a 46.8% discount to NAV. The outlook for space and areas such as climate, communications, mobility and cyber security, seems positive. Although less certain is its exposure predominantly to early and growth stage private businesses.

* A corporate client of Hybridan LLP

** Share prices, market capitalisations, and top 3 Shareholders all reported as at the close on 28 February 2025

By Jon Levinson

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