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C share from Baronsmead 3

Isis Equity Partners is raising up to 22m for the Baronsmead VCT 3 through a C share issue to expand the venture capital trust without diluting its existing portfolio.

The company says that if it issued more ordinary shares, this would have a negative impact on existing shareholders because more cash would dilute the asset backing of the existing holdings. C shares get around this problem as they can be converted in ordinary shares after three years, when the new cash has been invested in unquoted companies and Aim stocks.

Like the other Baronsmead VCTs in the Isis range, Baronsmead VCT 3 has a generalist strategy, investing across a range of industrial sectors such as business services and the media, while including companies listed on the Alternative investment market. It focuses on established and profitable unquoted companies that are looking to expand or are the subject of a management buy-out or buy-in.

Isis has offered VCTs since the market was established in 1995, so it has built up a strong track record and is considered a major player in the market. Consequently, IFAs may feel more comfortable recommending an established VCT from an established name rather than a new VCT.

Due to this VCTs ability to co-invest with the other Baronsmead VCTs, the type of companies it invests in may be larger more established companies which are more likely to provide dividends to shareholders. Companies looking for investment may also put Isis at the top of their lists, enabling Baronsmead 3 to be selective in its choice of holding.

However, one potential drawback of this C share issue for new investors is that they will have to wait three years to gaining access to the existing portfolio and the dividend payments that bring. It also means there is no immediate spread of risk for investors as suitable opportunities must first be found.


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