UK scientists launch IPO for latest 'wonder material'
A U.K. company looking to tap the potential of graphene — the new "wonder" carbon that is the thinnest, strongest and most impermeable material known in the universe — made its stock market debut Wednesday.
Applied Graphene Materials (AGM) floated on the U.K's AIM, a sub-market of the London Stock Exchange for companies too small to list on the main market, at a price of 155.5 pence, valuing the company at around £26.2 million. Shares rose throughout the day and closed at around 225.0 pence.
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Graphene is a "nano-material", which consists of single layers of carbon atoms and has a vast array of potential applications. The material could be used to make lighter aircraft, super-long-lasting batteries, cheaper solar energy panels, semiconductor electronics and sensors.
The substance was originally isolated by scientists at the U.K.'s University of Manchester in 2004, who went on to win the Nobel Prize in Physics for their experiments in graphene in 2010.
But despite its attributes — which include the best thermal conductivity of any known material, plus high levels of electric conductivity and elasticity — efforts to monetize it have been hampered by an inability to produce it cost efficiently and on a commercial scale. Most graphene production techniques rely on a supply of graphite, the natural version of which must be mined.
However, AGM — a commercial spin-off of Durham University in North-East England with market capitalization of around £26.2 million ($42.2 million) — has developed an alternative process at its factory in Teesside, which uses ethanol as a source of the carbon atoms. The material is produced in a format that can be added to liquid substances, making it suitable for use in oils, lubricants, inks and polymer and composite materials.
"AGM has developed a novel production process at its manufacturing plant and wants to raise funds to expand this and its commercial operations... Unlike most other large volume graphene production techniques, its process does not rely on the supply of graphite and is capable of cost efficiency and continuously producing high purity graphene," said the company in a news release prior to its listing on AIM.
CEO Jon Mabbitt said the £11 million ($17.7 million) listing would help expand production capacity at its plant from one ton of graphene per annum to eight tons per year.
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"We want to both scale-up further, to satisfy the demand we perceive will be coming for graphene, and also to invest in the people to support the development of different applications," said Mabbitt, explaining that the company ultimately hoped to produce 50 tons per annum, but that demand did not yet exist as the metal was unproven in a commercial context.
He added that "household names" in the oils and lubricants space were interested in AGM's graphene production, and that Procter & Gamble and Dyson were partner organizations involved in the research.
"It can add two or more of the fundamental properties needed in oil and lubricants... its mechanical strength is 100 times the strength of steel, it has five times the thermal conductivity of aluminium, and has 60 percent more electrical conductivity than copper," said Mabbitt.
After meeting with AGM, Khasa Ghaffarzadeh, the head of consulting at research firm IDTechEx, told CNBC that the company had differentiated itself in hitting on a effective technique for producing high quality graphene.
However, Anthony Vicari, an associate at technology research firm Lux Research, said it was unclear why AGM's production process would be any cheaper than its rivals and added that there were already multiple companies producing graphene in larger amounts. These include Ningbo Morsh Technology in China, which launched a graphene production line this year and will produce 300 tons per annum.
Both analysts agreed the market for graphene in its most basic form would only reach around $100 million by 2020, as demand would focus on products that incorporated it, rather than on the material itself. Ghaffarzadeh added that most value was likely to be in the energy storage sector.
So far the Far East dominates efforts to industrialize the material, with South Korean electronics giant Samsung the frontrunner in the field, although work everywhere remains at the R&D stage.
"We (the British) are good with the initial materials, but other people are better at seeing applications... we have to be careful with graphene, otherwise it is one of those things that we just let go," said Mabbitt.
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He said the IPO (initial public offering) was "significantly" oversubscribed, but that demand might have been hampered because AGM's production process was yet to receive a patent, despite the company applying in 2009 and receiving no challenges.
"During the roadshow, investors said it would have been a stronger story if the patent had been granted... if the (patenting) process could be improved that would give companies more certainty," Mabbitt said.
Since the IPO, parent-company IP Group — a FTSE 250-listed intellectual property commercialization firm — controls 34.9 percent of AGM, via a combination of direct ownership and investment by its North East Technology Fund. Meanwhile, Karl Coleman, AGM's founder and a professor at Durham University, owns 10.2 percent of shares.
—By CNBC's Katy Barnato