Why Gate Ventures is up 132%

There have been plenty of IPOs in the past few months, among them furniture stores, a tool hire firm, double-glazing supplier and so-called challenger bank. More are planned before the General Election in May, too. But few would even dream to do as well as Gate Ventures (GATE), a small investment company focused on the media industry which joined AIM earlier this week with no fuss or fanfare.

Ten big investors, among them Black and White Investments, Hercules Ventures, Last Capital and Bridgehead Venture Capital, have each taken an 8.74% stake in the business at 10p a share, which helped Gate raise a little over £3.2 million at IPO.

Incredibly, they've now quadrupled their money even before management has made any investments after Gate shares surged to 44p Thursday. There's been little press coverage, but almost 1.2 million shares changed hands out of a total issue of 32.42 million.

So, what's behind the rally? Well, the company itself has no idea. At 4.14pm Thursday it issued a brief statement to the stock exchange saying "it knows of no reason for this movement and that there are currently no updates to the information contained in the company's admission document dated 10 March 2015."

Gate's management certainly has an interesting pedigree and has built up a following in the Far East. Understated executive chairman Geoff Morrow has sat on the board of numerous companies, including China Sports Development - currently listed on small cap equity market ICAP Securities & Derivatives Exchange (ISDX) - and former PLUS-listed Global Education Group, which he left in 2008 "to pursue other interests".

A quick check on Wikipedia also reveals Morrow co-wrote a number of songs for Elvis Presley. He also helped pen Barry Manilow's "Can't Smile Without You" as well as lesser-known mid-80s single "The Gonks Are Here For Christmas".

Gate also has a well-connected part-time chief executive in Brooke Southwell Rene Guy Greville. He's a non-executive partner at high-level financial recruiter Fairway Search and runs sports betting publisher Sports Trading Network.

Gate says it will invest in the media and entertainment sectors, most likely theatre production and the music industry in either China or the UK. "The board intends to focus on businesses using technologies such as online social media, the internet and disruptive software development," according to a statement.

Clearly, there is speculation about the kind of business that Gate will invest in. Perhaps it will announce its maiden investment soon, but until then it is just a cash shell. Backing this stockmarket newbie with nothing more than that to go on is high risk indeed.

This article is for information and discussion purposes only and does not form a recommendation to invest or otherwise. The value of an investment may fall. The investments referred to in this article may not be suitable for all investors, and if in doubt, an investor should seek advice from a qualified investment adviser.