Rand Capital Receives $13.1 Million from Sale of SciAps, Inc.

Rhea-AI Summary

Rand Capital (Nasdaq: RAND) has successfully completed the sale of its portfolio company, SciAps, Inc., to Spectris plc. The transaction, which closed on August 21, 2024, yielded total proceeds of $13.1 million for Rand, surpassing the June 30, 2024 valuation of $10.8 million for Rand's equity and debt investments in SciAps.

The proceeds include $2.1 million in debt repayment, $165,000 in interest income and loan-related fees, and $10.8 million in equity return. An additional $244,000 is held in transaction-related escrows. This successful exit from a 2013 investment showcases Rand's ability to generate substantial returns, with the equity investment having a cost basis of just $3.1 million.

Positive

• Sale of SciAps yielded $13.1 million in total proceeds, exceeding the June 30, 2024 valuation of $10.8 million
• Equity investment with a cost basis of $3.1 million resulted in a $10.8 million return
• Transaction enhances Rand's liquidity and strengthens its position to pursue new debt opportunities

Negative

• Repayment of SciAps debt will reduce Rand's interest income in the short term

Insights

Financial Analyst

The sale of SciAps represents a significant financial win for Rand Capital. With $13.1 million in total proceeds, exceeding the previous valuation by $2.3 million, this exit demonstrates Rand's ability to generate substantial returns from its equity investments. The equity return of $10.8 million on a $3.1 million cost basis is particularly impressive, showcasing a 248% gain.

However, investors should note the short-term impact on interest income due to the $2.1 million debt repayment. This aligns with Rand's strategic shift towards a more debt-focused portfolio, which could potentially lead to more stable, albeit possibly lower, returns in the future. The increased liquidity positions Rand well for new investments, potentially accelerating this transition and supporting future dividend growth.

Market Research Analyst

This transaction underscores the growing interest in advanced analytical instrument companies by larger industrial technology firms. Spectris plc's acquisition of SciAps indicates a trend of consolidation in the scientific instrumentation market, driven by the need for comprehensive product portfolios and enhanced R&D capabilities.

For Rand Capital investors, this exit validates the company's investment strategy in the lower middle market. It demonstrates Rand's ability to identify promising companies in niche technology sectors and support their growth to attractive exit valuations. The success of this investment could potentially attract more attention from both institutional and retail investors to Rand's business model, possibly leading to increased demand for its stock.

Portfolio Manager

This exit significantly boosts Rand Capital's liquidity position, providing ample resources for new investments. The $13.1 million influx represents a substantial portion of Rand's total assets, which stood at $63.9 million as of their last quarterly report. This cash infusion gives Rand considerable flexibility in pursuing its strategy shift towards more debt-focused investments.

Investors should watch closely how quickly and effectively Rand deploys this capital. The transition from equity to debt investments could lead to more predictable income streams, potentially supporting consistent dividend payments. However, it may also limit upside potential from equity appreciation. The market's reaction to this strategic shift will be important in determining the stock's performance in the coming quarters.

BUFFALO, N.Y.--(BUSINESS WIRE)-- Rand Capital Corporation (Nasdaq: RAND) (“Rand” or the “Company”), a business development company providing alternative financing for lower middle market companies, today announced the successful completion of the previously reported acquisition of its portfolio company, SciAps, Inc., by Spectris plc (LSE: SXS). The transaction closed on August 21, 2024, and yielded total proceeds for Rand at the closing of $13.1 million, exceeding the June 30, 2024 valuation for Rand’s equity and debt investments in SciAps of $10.8 million.

The proceeds from the sale payable at closing to Rand consisted of $2.1 million in debt repayment, $165,000 in interest income and loan-related fees, and $10.8 million in equity return. These totals also reflect $244,000 held in transaction-related escrows.

“The sale of SciAps has delivered a substantial return on our initial 2013 investment,” stated Daniel P. Penberthy, President and CEO of Rand Capital. “With an equity investment that had a cost basis of $3.1 million, this outcome highlights the impressive success of the sale. The repayment of debt by SciAps as part of the acquisition transaction will reduce our interest income in the short term, however, the proceeds from the equity return will further support our strategic shift towards a more debt focused investment portfolio. These proceeds have enhanced our liquidity and strengthened our position to identify and capitalize on new debt opportunities, which we expect will further drive our interest income and shareholder dividends over the long term.”

ABOUT RAND CAPITAL

Rand Capital (Nasdaq: RAND) is an externally managed business development company (BDC). The Company’s investment objective is to maximize total return to its shareholders with current income and capital appreciation by focusing its debt and related equity investments in privately-held, lower middle market companies with committed and experienced managements in a broad variety of industries. Rand invests in businesses that have sustainable, differentiated and market-proven products, revenue of more than $10 million and EBITDA in excess of $1.5 million. The Company’s investment activities are managed by its external investment adviser, Rand Capital Management, LLC. Additional information can be found at the Company’s website where it regularly posts information: randcapital.com.

Safe Harbor Statement

This press release contains “forward-looking statements” within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than historical facts, including but not limited to statements regarding the impact of the repayment of debt by SciAps as part of the transaction on the Company’s interest income in future periods; the strategy of the Company and its outlook; statements regarding maintaining or increasing interest income earned by the Company and the Company’s dividend; and any assumptions underlying any of the foregoing, are forward-looking statements. Forward-looking statements concern future circumstances and results and other statements that are not historical facts and are sometimes identified by the words “may,” “will,” “should,” “potential,” “intend,” “expect,” “endeavor,” “seek,” “anticipate,” “estimate,” “overestimate,” “underestimate,” “believe,” “could,” “project,” “predict,” “continue,” “target” or other similar words or expressions. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove to be incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. The inclusion of such statements should not be regarded as a representation that such plans, estimates or expectations will be achieved. Important factors that could cause actual results to differ materially from such plans, estimates or expectations include, among others, (1) evolving legal, regulatory and tax regimes; (2) changes in general economic and/or industry specific conditions; and (3) other risk factors as detailed from time to time in Rand’s reports filed with the Securities and Exchange Commission (“SEC”), including Rand’s annual report on Form 10-K for the year ended December 31, 2023, quarterly reports on Form 10-Q, and other documents filed with the SEC. Consequently, such forward-looking statements should be regarded as Rand’s current plans, estimates and beliefs. Except as required by applicable law, Rand assumes no obligation to update the forward-looking information contained in this release.

View source version on businesswire.com: https://www.businesswire.com/news/home/20240828358704/en/

Company:

Daniel P. Penberthy

President and CEO

716.853.0802

dpenberthy@randcapital.com

Investors:

Deborah K. Pawlowski / Craig P. Mychajluk

Kei Advisors LLC

716-843-3908 / 716-843-3832

dpawlowski@keiadvisors.com / cmychajluk@keiadvisors.com

Source: Rand Capital Corporation

FAQ

How much did Rand Capital (RAND) receive from the sale of SciAps, Inc.?

Rand Capital (RAND) received total proceeds of $13.1 million from the sale of SciAps, Inc. to Spectris plc, which closed on August 21, 2024.

What was the breakdown of the proceeds Rand Capital (RAND) received from the SciAps sale?

The proceeds consisted of $2.1 million in debt repayment, $165,000 in interest income and loan-related fees, $10.8 million in equity return, and $244,000 held in transaction-related escrows.

When did Rand Capital (RAND) initially invest in SciAps, Inc.?

Rand Capital (RAND) initially invested in SciAps, Inc. in 2013, with an equity investment that had a cost basis of $3.1 million.

How will the sale of SciAps affect Rand Capital's (RAND) interest income?

The repayment of SciAps debt as part of the acquisition transaction will reduce Rand Capital's (RAND) interest income in the short term.