TORONTO, June 05, 2023 (GLOBE NEWSWIRE) -- Flow Capital Corp (TSXV:FW) (“Flow Capital” or “Flow”) reports on its investment performance over the 5-year period from March 2018, when the formation of Flow was first announced.
Key highlights:
- Invested $46 million into 16 portfolio companies
- Achieved IRR of 30.5% on capital deployed
- Recorded Loss Ratio of 0.7%
- Increased Book Value Per Share by 172%; from a low of $0.45/share1 at Q4, 2019, to $1.23/share at Q1 2023
- Generated positive EBITDA and Free Cash Flow for the past 3 years
- Repurchased 13.6M (~31%)2 of the outstanding common shares at a weighted average of 48%3 discount to book value.
Details of Flow’s investment performance since March 2018*
| # of Investments | Capital Invested | Capital Returned | Value Remaining | IRR | Loss Ratio*** | |||
| Investments where debt has been repaid | 8 | $15.5M | $23.9M | $2.6M** | 42.9 | % | 2.2 | % |
| Currently Active Investments | 8 | $30.5M | $9.9M | $32.7M | 22.60 | % | 0 | |
| Totals | 16 | $46M | $33.8M | $35.4M | 30.50 | % | 0.70 | % |
* Data in the table above covers the period of new investments from March 2018 and includes all payments, fees, and equity gains until April 2023.
** Could include warrants and other equity-like bonuses. Warrant values are calculated using Black-Scholes pricing and are not increased unless there is an external equity financing event.
*** Loss ratios calculated based on total capital deployed in the category.
On March 11, 2018, LOGiQ Asset Management Inc. (“LOGiQ”) and Grenville Strategic Royalty Corp. (“Grenville”) entered into a business combination agreement as a plan of arrangement, under the Business Corporations Act (British Columbia) (the “BCBCA”). The combined entity was subsequently renamed Flow Capital Corp.
Since that time, Flow has transitioned its business away from perpetual royalties and mutual fund asset management, to focus exclusively on Venture Debt investing, or more specifically, investing in senior secured debt instruments, in high-growth (primarily technology) companies, with equity upside.
“These returns have been generated from investments in companies that have passed a highly selective process designed to identify the most attractive risk/reward trade-off. Only the best companies get through Flow’s rigorous screening process,” said Alex Baluta, CEO of Flow
“As new investments are made, we expect aggregate returns could dip in the shorter term until such time as new equity exits are realized from portfolio companies which achieve a liquidity event and our equity exposure upside is realized. The higher returns are evident in the investments which have already fully or partially exited,” continued Mr. Baluta.
“Recent market dynamics have created an environment in which the demand for Flow Capital’s funding has grown dramatically. Deal flow has accelerated in recent months, and it is our expectation that much more capital will be deployed into more great growth companies at a faster rate,” said Mr. Baluta.
“Flow helps growth companies scale their business with covenant light, minimally dilutive funding, while taking debt-like risk and generating equity-like returns for our shareholders. These 5 year returns demonstrate the capability of our approach in generating significant returns for our stakeholder,” summarized Mr. Baluta.
About Flow Capital
Flow Capital Corp. is a diversified alternative asset investor and advisor, specializing in providing minimally dilutive capital to high growth businesses primarily in the technology sector. To apply for financing, visit www.flowcap.com.
For further information, please contact:
Flow Capital Corp.
Alex Baluta
Chief Executive Officer
alex@flowcap.com
1 Adelaide Street East, Suite 3002,
PO Box 171,
Toronto, Ontario M5C 2V9
Forward-Looking Information and Statements
This press release contains certain “forward-looking information” within the meaning of applicable Canadian securities legislation and may also contain statements that may constitute “forward-looking statements” within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. Such forward-looking information and forward-looking statements are not representative of historical facts or information or current condition, but instead represent only the Company’s beliefs regarding future events, plans or objectives, many of which, by their nature, are inherently uncertain and outside of the Company’s control. Generally, such forward-looking information or forward-looking statements can be identified by the use of forward-looking terminology such as “plans”, “expects” or “does not expect”, “is expected”, “budget”, “scheduled”, “estimates”, “forecasts”, “intends”, “anticipates” or “does not anticipate”, or “believes”, or variations of such words and phrases or may contain statements that certain actions, events or results “may”, “could”, “would”, “might” or “will be taken”, “will continue”, “will occur” or “will be achieved”. The forward-looking information contained herein may include, but is not limited to, information with respect to: prospective financial performance; including the Company’s opinion regarding the current and future performance of its portfolio, expenses and operations; anticipated cash needs and need for additional financing; anticipated funding sources; future growth plans; royalty acquisition targets and proposed or completed royalty transactions; estimated operating costs; estimated market drivers and demand; business prospects and strategy; anticipated trends and challenges in the Company’s business and the markets in which it operates; the amount and timing of the payment of dividends by the Company; and the Company’s financial position. By identifying such information and statements in this manner, the Company is alerting the reader that such information and statements are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed or implied by such information and statements.
An investment in securities of the Company is speculative and subject to a number of risks including, without limitation, risks relating to: the need for additional financing; the relative speculative and illiquid nature of an investment in the Company; the volatility of the Company’s share price; the Company’s limited operating history; the Company’s ability to generate sufficient revenues; the Company’s ability to manage future growth; the limited diversification in the Company’s existing investments; the Company’s ability to negotiate additional royalty purchases from new investee companies; the Company’s dependence on the operations, assets and financial health of its investee companies; the Company’s limited ability to exercise control or direction over investee companies; potential defaults by investee companies and the unsecured nature of the Company’s investments; the Company’s ability to enforce on any default by an investee company; competition with other investment entities; tax matters, including the potential impact of the Foreign Account Tax Compliance Act on the Company; the potential impact of the Company being classified as a Passive Foreign Investment Company (“PFIC”); the Company’s ability to pay dividends in the future and the timing and amount of those dividends; reliance on key personnel, particularly the Company’s founders; dilution of shareholders’ interest through future financings; and general economic and political conditions; as well as the risks discuss ed in the joint management information circular of the Company dated May 2, 2018 and the risks discussed herein. Although the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in the forward- looking information and forward-looking statements, there may be other factors that cause results not to be as anticipated, estimated or intended.
In connection with the forward-looking information and forward-looking statements contained in this press release, the Company has made certain assumptions. Assumptions about the performance of the Canadian and U.S. economies over the next 24 months and how that will affect the Company’s business and its ability to identify and close new opportunities with new investees are material factors that the Company considered when setting its strategic priorities and objectives, and its outlook for its business.
Key assumptions include, but are not limited to: assumptions that the Canadian and U.S. economies relevant to the Company’s investment focus will remain relatively stable over the next 12 to 24 months; that interest rates will not increase dramatically over the next 12 to 24 months; that the Company’s existing investees will continue to make royalty payments to the Company as and when required; that the businesses of the Company’s investees will not experience material negative results; that the Company will continue to grow its portfolio in a manner similar to what has already been established; that tax rates and tax laws will not change significantly in Canada and the U.S.; that more small to medium private and public companies will continue to require access to alternative sources of capital; that the Company will have the ability to raise required equity and/or debt financing on acceptable terms; and that the Company will have sufficient free cash flow to pay dividends. The Company has also assumed that access to the capital markets will remain relatively stable, that the capital markets will perform with normal levels of volatility and that the Canadian dollar will not have a high amount of volatility relative to the U.S. dollar. In determining expectations for economic growth, the Company primarily considers historical economic data provided by the Canadian and U.S. governments and their agencies. Although the Company believes that the assumptions and factors used in preparing, and the expectations contained in, the forward- looking information and statements are reasonable, undue reliance should not be placed on such information and statements, and no assurance or guarantee can be given that such forward-looking information and statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such information and statements.
The forward-looking information and forward-looking statements contained in this PRESS RELEASE are made as of the date of this PRESS RELEASE, and the Company does not undertake to update any forward-looking information and/or forward-looking statements that are contained or referenced herein, except in accordance with applicable securities laws. All subsequent written and oral forward- looking information and statements attributable to the Company or persons acting on its behalf is expressly qualified in its entirety by this notice.
Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.
1 Includes the impact of the de-recognition of the Deferred Tax Asset in Q4 2019, due to a history of persistent losses in the prior 3 years. The Tax Asset was subsequently re-recognized in Q4 2022, after a sustained improvement in financial performance and the expectation that such continued performance will allow for the Canadian non-capital loses and other deductible temporary differences to be utilized before their expiry date.
2 Total shares repurchased over the 5-year period as a percentage of the opening balance of shares outstanding after the business combination in June 2018.
3 Discount to book value estimated by comparing the VWAP for shares repurchased against the average book value per share reported for the most recent corresponding quarters.
