Investments

MIDAS SHARE TIPS: Taking a punt on Molten Ventures could be sure-fire winner


Online banking group Revolut is one of the UK’s biggest and best-known technology firms.

Founded in 2015, Revolut has attracted criticism down the years but today, it has around 45 million customers, recently gained a banking licence and is mulling a flotation of more than £30 billion on the London Stock Exchange.

Molten Ventures invested £11 million in Revolut three years after the business was founded. Today, that stake is worth around £65 million.

Founded by two former executives at private equity group 3i, Molten invests in young, fast-growing technology businesses, providing them with cash and expertise to help them expand.

The group focuses on firms that have already made progress but need external support to realise their potential. Rewards in this area can be substantial.

Paid-off: Investing in Revolut has seen handsome return

Paid-off: Investing in Revolut has seen handsome return

Chief executive Martin Davis targets companies which can deliver at least five times his original investment and ideally 10 or 20 times. Returns do not come overnight. Davis tends to hold onto stakes in businesses for between five and ten years and some do better than others.

Overall, however, Molten’s track record is encouraging. The group listed on the stock market in 2016, since when it has generated more than £600 million, as businesses are floated on the stock market, sold to larger companies or passed on to private equity owners.

Davis casts a wide net. Molten has investments in more than 130 companies at varying degrees of maturity. Some may fail. Others are likely to exceed expectations. Over the past eight years however, there have been just a handful of failures and these have been more than offset by big successes.

While Molten’s portfolio spans dozens of firms, Davis and his team focus on a core of 15 to 20 businesses, across all aspects of technology. The largest investment, Thought Machine, helps traditional banks to modernise their payment systems and counts Lloyds, Standard Chartered and JP Morgan as customers. 

Having invested £36 million in Thought Machine, the group’s stake is now valued at almost £100 million and expected to continue increasing. Data cloud specialist Aiven could be even more impressive. The venture firm invested £4.6 million in Aiven and it is now valued on the books at £82 million, suggesting a return of almost 18 times.

Many large investors worry that Molten’s valuations are overly optimistic. The company says its investments are worth around £1.2 billion but the stock market values the group at little more than £700 million, a discount of 40 per cent. Such scepticism is understandable. Technology stocks have been under attack across the globe and even the largest businesses have not been immune.

Recent deals from Molten offer some comfort, however. Last week, Davis sold out of AI firm M-Files for £47 million, having invested £6.5 million in the business. In April, an original investment of £9 million in breast surgery specialist Endomagnetics generated a return of £35 million when the business was sold to a large US medical group.

Two further deals delivered successful results and all four investments have been sold at around the same price or more as they were valued in Molten’s books.

Midas verdict: Molten Ventures shares are £3.87, down from more than £11 three years ago. Investing in young technology firms is inherently risky but Molten’s broad portfolio adds resilience and the track record since flotation is reassuring. Molten shares are not for the cautious but adventurous investors looking to support UK technology firms could take a punt on this stock.

Traded on: Main market Ticker: GROW Contact: moltenventures.com or 020 7931 8800

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