As consumers increasingly become targets for scams, companies such as Featurespace, which uses AI to target financial fraud, have spotted an opportunity. It is working with banks and payment processing firms across the world.
Featurespace, spun out of Cambridge University, is also one of the most promising companies in the sprawling portfolio of IP Group, a FTSE 250 investor in intellectual property. IP Group partners with universities to help commercialise intellectual property. It offers investors a way to back new technologies without shouldering the risk of early-stage development.
Founded in 2001, IP Group is best known for its investment in Oxford Nanopore, a gene-sequencing “unicorn” that last week unveiled its plans for an initial public offering in London, which could value the company at £4 billion. IP Group, led by chief executive Alan Aubrey, was an early backer and today the company makes up about 25 per cent of its portfolio.
So it was perhaps a little surprising that IP Group’s shares fell more than 6 per cent after Nanopore announced its plans. Spun out of Oxford University in 2005, Nanopore has benefited from the pandemic as its DNA sequencing devices have become essential in identifying and tracking the spread of Covid-19 variants.
The company had a £2.4 billion valuation at its last fundraising in May. Applying the same multiple as US rival Pacific Bioscience’s valuation, gives a figure close to $5.4 billion (£3.9 billion).
Much of this optimism was already baked into IP Group’s share price. Its stock has risen almost 46 per cent this year, closing on Friday at 146.8p, valuing it at £1.6 billion. Part of its recent run has been thanks to holdings such as Hinge Health, a digital clinic for musculoskeletal pains, and Ceres Power, an AIM-listed fuel cell pioneer.
IP Group has a long-term approach, backing business from conception to commercialisation, meaning investors must be patient. The company suffered collateral damage after the collapse of Neil Woodford’s portfolio when the disgraced fund manager sold his holding in IP at a steeply discounted 53.5p a share.
Since then, IP Group has cut costs and focused its investments. It announced its first dividend this year, and had at the last count almost £250 million in cash. In its results for the first six months of this year, IP Group said net assets were £1.4 billion. It has allocated £20 million for share buybacks. IP Group has enjoyed a spell of good news, and there are jewels in its portfolio, but it looks well priced. Hold.
