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SMALL CAP MOVERS: Revolution Beauty soars; GYG sinks

Well, we start the report discussing Revolution Beauty once again – but this time the story told is slightly more cheery than it has been in recent weeks and months.

For the online make-up group has found an ally in Boohoo, the clothier that owns the NastyGal and PrettyLittleThing brands.

While the exact details of the transaction haven’t been disclosed, Boohoo has taken a 7.1 per cent stake in Revolution, which last week rattled investors after it flagged issues raised by auditors.

Revolution Beauty shares rose 65% this week, but they are down 84% since last July’s IPO

The Boohoo investment provided a much-needed boost to beleaguered investors as the stock jumped 65 per cent.

Listed last July at 160p, the shares are now trading at 26p each – that’s an 84 per cent loss for investors who bought in at the IPO.

Revolution wasn’t alone among losers of the class of 2021 with many of last year’s stock market debutants leaching money for those who backed their flotations.

Analysis by Proactive showed that while the average performance through to early February was good, with the AIM contingent alone up an average of 21 per cent, the rug has been pulled in recent months.

The big fallers included Parsley Box, which has plunged 95 per cent since listing, In The Style and Victorian Plumbing Group (both down over 80 per cent), and CMO Group (off 70 per cent).

A common theme for companies that came to market last year was to add a digital twist to what was essentially a traditional business.

The success of Zoom, Netflix, the food delivery services and online retailers during lockdown appears to have primed the pumps.

Clive Black, the veteran retail analyst at Shore Capital, reminded us this week of there are some very sensible rules to investing in IPO stocks – guidelines that may not always have been followed by the professionals.

‘Keep [your] feet on the ground, apply common-sense to market valuations and ask the simple question: is this business really worth this [valuation]?’ he told Proactive this week.

‘Greed is a powerful force, as is hyperbolic language about addressable markets and the like,’ he added.

‘Whilst monies can be made in riding the crest of waves, relatively few win… and so it is rather dull fundamentals that tend to out.’

Turning to the wider market, the AIM All Share reversed 1.2 per cent this week to 921.93 as it underperformed the FTSE 100, which advanced 0.5 per cent in the same period. The height of the summer holidays, the traded volumes were light across both the blue-chip and small-cap markets.

Friday was a day light on corporate news, so it brought into even sharper relief the pain being felt by Joules, which sounded the earnings alarm.

The shares fell 36 per cent after the clothing and homewares group said trading had ‘softened materially’ in the last five weeks since it updated the market.

That July statement spoke of pressure on the company’s profit margins, while the latest announcement said its core categories – outerwear, rainwear, knitwear, and wellies – had been hit by Britain’s hottest summer since 1976.

Its woes were compounded by the ‘ongoing subdued consumer demand due to the well-documented cost of living crisis’.

All of this will make for a tricky induction for Joules’ new chief executive, Jonathon Brown, when he joins on September 7.

Super yacht maintenance group GYG sank a further 33 per cent as it bid bon voyage to the public markets.

It has been a rough old week too for Strip Tinning (down 28 per cent), which makes connectors used in the automotive industry.

Its pain was caused by a ‘purported’ (their word not ours) contract cancellation by a Croatian customer.

Finally, investors in Power Metal have reason to be cheerful after a more than decent week – a period in which the share price has rocketed 87 per cent.

This followed exploration drilling at its Molopo Farms complex in Botswana, which the company reckons has hit the edge of ‘very large-scale and strong magnetic conductor’ rich in nickel.

Chief executive Paul Johnson called the announcement the most important in the company’s three-year history.

‘As a result of the findings, multiple drillholes planned for the 2022 programme will target the centre of the magnetic conductor where we believe there is the potential for a more strongly mineralised system where the conductive response is considerably stronger and larger,’ he told investors.

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