Imagination Technologies Group said on Monday that it had sold a 3 percent stake in the company to U.S. giant Intel Corp, sending its shares up 10 percent.
The software developer said it would issue 6 million new shares to Intel at 88 pence the trading price at the market close on Friday.
The deal will secure 5.28 million pounds for Imagination, a move Bridgewell analyst Dan Risdale said would boost company credibility as well as strengthening the balance sheet.
The shares were up 9.9 percent at 96.75 pence by 9:57 a.m.
There had been a lack of newsflow from the company recently so the shares had started to tail off, Risdale said in a telephone interview.
But this deal shows that industry experts like Intel see value in the company at this price.
He added that the investment was just small enough not to overly dilute stakes held by other investors, preventing the usual sell off that typically follows a share issue.
Imagination also said it had signed new licensing agreements with Intel and fellow U.S firm Texas Instruments Inc.
Under the agreement with Intel, the UK software developer will extend the licensing and deployment of its intellectual property for graphics and video for use with Intel's PCs and mobile computing.
Under the deal with Texas Instruments, the semiconductor company will use part of Imagination's graphics technology in its latest application processor.
Hossein Yassaie, Chief Executive of Imagination, said: Our relationship with Intel has reached a new stage ... we are delighted to extend this relationship.