With a market cap of only 55m at time of writing,Concha(LSE: CHA)sitsunder the radar of most investors. However, the company is one of AIMs best performers this year, as year-to-date the Conchas shares have jumped more than 2,000%.
Still, Concha is loss-making and the company, which bills itself as aninvestment company, focused on the mobile, internet, sports, social media, digital and technology space has not yet made a game-changing investment.
Nevertheless, after falling by around a third today, should investors take advantage of declines and buy in?
Conchas shares may have fallen by more than a third today but theres little in the way of news to fuel further declines. The only news that has been released by the company today, regards the excise of 2m warrants, generating gross cash proceeds of 80,000. This warrant excise is part of the companys fund raising package, which was announced alongside full-year results.
The package included theplacing of 100m ordinary shares at 4p per share, representing 7.3% of the current issued share capital, with new shareholders to raise 4m. Additionally, theplacing also provides for warrants to subscribe for an additional 100m shares at 8p per share, potentially raising a further 8m.
These additional funds will be used to finance Conchas next set of investments. According to Chairman Chris Akers:
Concha is now well positioned with a strong board and much improved capital base. Given the opportunities currently under evaluation, your Board is confident of being able to consummate a number of exciting and considered investments during the course of the coming months.
Cash and equivalents were 1.8m at the year ended June 30th, excluding funds from the placing.
So far, Concha has not had much success when it comes to investing. Indeed, the companys first investment, Moshen, made last year, went out of business six months after Concha invested. Then the next venture,Pixcom Ventures also worked out to be a dud.
Luckily, Conchas third investment, a 30% stake in The Works, a specialist design media company has, so far, worked out for the company. The Works reported strong double-digit growth in year on year revenues this year and the firms pipeline of business is strong.
Private equity and venture capital investors usually experience plenty of failures before they pick a home run, so Conchas record is nothing out of the ordinary.
And the company remains on the lookout for attractive opportunities. The recent fundraising will help Concha take advantage of the exciting opportunitieswhich in Conchas view have a real opportunity to secure a dominant position within their niche area of activity within the medium to long term, according to management.
As with all venture capital funds, if Concha makes the right picks, the sky is the limit for the company.
What to do?
The problem with venture capital businesses like Concha is that their success is usually pretty binary. Either they make an investment that becomesthe nextFacebook, or they crash and burn. So, with this in mind, todays declines may present an opportunity to buy, but only for investors with a high risk tolerance.
If you are considering investing in Concha, then the safest way is to use a basket approach. Simply put, a basket approach uses a basket of risky high-growth shares andreliable dividend-paying stocks, reducing risk and allowing you to sleep soundly at night.
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Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.