Letter: The price of investment

Sir: Your piece in 'View from City Road' (18 May) suggesting that the Division new issue was underpriced fails to address the question of how to value a company with a turnover of pounds 1m, until recently no profit and net assets of less than pounds 400,000. At the placing price of 40p the company was valued at pounds 13.5m, including pounds 5m new cash put in from the placing. The market now values the company at more than pounds 30m. How would you have valued the business? You may like to ask a venture capitalist how he would have valued the business - considerably less than the pounds 8.5m valuation, excluding the new money raised, I am sure.

The company made presentations to a large number of potential investors and their views were considered before the issue was priced. The placing price was the price at which institutions were prepared to sub- underwrite the issue.

As a result of this issue we have raised a significant amount of money to support British technology at its best. Until recently, such ideas could be underwritten only in the US or had to be funded at punitive rates by venture capitalists. Like Tadpole Technology, this is another milestone in using the stock market to support British enterprise and we should be applauded for taking the initiative rather than derided as a result of speculation by investors on the first day of dealings.

Yours faithfully,

W. MARTIN ROBINSON

Managing Director

Henry Cooke Corporate Finance

Manchester