STOCK MARKET NEWS – THE DAY/WEEK IN SMALL CAPS
The Week In Small Caps: May 27
The phenomenon of Britain bashing, by those who want us to give up and go back into the EU, has been accelerating in the recent months, presumably getting things set for the next General Election. To make it clear, given that our dear civil service a.k.a the blobs, never carried out Brexit, we are not in the EU or out, just somewhere in the middle of the English Channel. Of course, we currently have the worst of both worlds, all the red tape and business prevention laws the EU gave us, but none of the benefits of leaving, whatever they eventually prove to be.
Old People’s Home
Much of the Britain bashing has focused on the exact areas we excel in, one of which is the London Stock Exchange, or should that be, used to excel in? The quote from Katie Martin in the recent Financial Times’s Behind The Money Podcast of the LSE being an old people’s home for companies, says it all. This was not her view, it was said to her. This was presumably referring to the lack of tech companies.
However, it is actually very damaging comment nonetheless, and underlines the media’s constant anti-entrepreneur, anti- rich, anti-success attitude. And of course, this attitude is why it is easy for those with a positive mindset to go other jurisdictions, such as the USA. During the week I met someone who used to be a player here listing companies. He is now in the process of listing eleven companies in New York. All of this loss to the UK is directly the fault of regulators and politicians over here, not just since Brexit, but over decades. Even worse, it is not something they sought, it was and is deliberate.
Unfortunately, this attitude pervades so many areas, including the way that the stock market has been treated over the past few decades. I am reminded of Ronald Reagan’s quote: If it moves, tax it. If it keeps moving, regulate it. And if it stops moving, subsidize it. Ironically, the beginning of the end came with Big Bang in the 1980’s – deregulating the London market. The boom was then regulated, then over-regulated, and now we are getting close to the need to subsidy to save it.
The situation currently is that there is almost no incentive for a private company to get listed. The cost, the red tape, the Kafkaesque nightmare of often contradictory rules, the myriad shark like service providers to negotiate. In fact, stock exchanges should provide many of these aspects in an all inclusive package, e.g. prospectuses, legals, PR et al, as part of a subscription. Of course, even if you get to market and manage to raise the money in an environment which has as much liquidity as the Gobi Desert, you are facing a small cap market where participants are hardly dancing in a conga line.
Bears And Journalists
The story of small caps this week was actually quite heartening, given the negativity of what has been described above. Once again, many of the sharpest rising stocks were companies who have been hit hardest by the only people more negative than mainstream financial journalists, shorters. In fact, I might argue that shorters are less negative than the anti-success media, at least now and again the bears will cover their positions.
Once again, Chill Brands (CHLL) continued to recover, and notably on no fresh news to drive its near 50% jump. It was also noticeable that there was no fresh negative attack on the merits of its forthcoming UK vaping sales and distribution partnership. One presumes the bears have given up, and or, having exiting their shorts at a loss, have no reason to pursue the vendetta. What is interesting as well is that the improvement in the stock has ostensibly come from the company showing that it is proactive and keen to win, something that most small caps tend not to do.
Another company which seems keen to win with new management is Versarien (VRS). While it might be over the top to suggest that we have seen a night to day difference, since the turnaround strategy was announced a couple of months ago, we really have seen a turnaround. This is not something that happens very often in the world of small cap minnows. One hopes the company continues to do what it has said on the tin.
Although not creating as much as a splash with investors as Chill and Versarien, we have been treated to a near 50% share price this week at Active Energy (AEG). The stock appears to be on its way to an 8p technical target, after gapping up on news that permits have been granted at Ashland to allow construction and operation of the CoalSwitch® plant to commence. Given that the shares were trading as high as 65p, as recently as the beginning of 2021, one might dare to suggest that 8p could be the minimum we see on the upside over the course of the summer.
AI Stocks: e-Therapeutics, IQ-AI, Poolbeg
One of the things that many in the market are talking about is Artificial Intelligence. Of course, as the London Stock Exchange is an “old people’s home” we do not have too many stocks that encompass this revolutionary technology. Indeed, the clue is not always in the name, such as IQ-AI (IQAI). Poolbeg (POLB) has a AI Influenza programme, and perhaps in an analogous way, we have e-therapeutics (ETX), integrating computational power and biological data to discover RNAi medicines.
Obviously, one has to be something of a rocket scientist to work out the technicalities of how AI works in each particular application, but even Shania Twain might be impressed at the direction of travel here. Indeed, while US AI stocks are buzzing, UK ones are still only at the starting gate, so we have a chance to get UK AI stocks in 2023 at the levels we saw in the US last year.
Given that I do a round up of the best of the day’s RNS releases from 7am, and publish the RNS Hotlist by around 8am, it can be said I am normally familiar with most of the small cap news. However, something which is slightly frustrating are the companies that release news after the rush between 7am and 7.15am. The problem here with a RNS at 8am or 8.15am, is that there is a rather high chance that unless (or even if you have an alert) you will miss it.
A couple of companies in the small cap space managed this during the week, coincidentally, both on Friday around 8am. Zenith Energy (ZEN) was telling the market about its new focus on the USA. This is of interest as the company hitherto has had a strategy of acquiring low cost / high risk / high reward assets to develop. Often these are in relatively exotic locations. What the company has said this week is that this ongoing strategy will continue, but it is taking advantage of the overall boost in energy prices to acquire producing assets in a Tier 1 jurisdiction. The plus point of this strategy is that the company can wash its face comfortably as it develops assets across other geographies.
Rockfire (ROCK) also had a Friday feeling, with its RNS unveiled at 8.19am. Here things seems to be hotting up nicely at its Molaoi deposit in Greece. Followers of Rockfire will be aware that this deposit with its history was always likely to be a winner, and it would appear that the way things are going it is exceeding expectations. This realisation could have a disproportionately positive effect on the Rockfire share price, it has already doubled in recent months, given how negatively the sentiment towards the company had sagged in the autumn. While it was suggested on a charting basis that the shares could hit the 0.25p when they were as low as 0.15p earlier this year, the present charting configuration suggests we may be due if not the 100% rise already achieved repeated, but perhaps 50% more over the next month.
Golden Metal Resources
Rockfire was not the only small cap on the discovery trail. Stock market newbie Golden Metal Resources (GMET), in which Power Metal (POW) has 62%. The good news here was that GMET has exceeded its expectations, and at high grade. The market already knows Nevada is one of the best mining jurisdictions in the world, it seems that GMET is keen to remind us.
Andrew “42x” Austin
It was a very intense week of interviews at the newly launched Zakstraderscafe.com website this week. My mind was captured by news that stock market legend, hero, all round marvel, Andrew “42x” Austin, of Rockrose and Kistos (KIST) fame has taken a stake in emerald mine owner URA Holdings (URAH). I interviewed Peter Redmond of URA Holdings off the back of this. It was also good to interview Dan Gooding, Executive Director at Nuformix (NFX), as he continues to get the company he founded ship shape. The week ended with Charles FitzRoy, CEO Bradda Head, where the lithium group is right in the box seat as far as the US EV battery market. All this week’s interviews are at https://zakstraderscafe.com/ceo-interviews/
Finally, as we were reminded of gods entering stocks via Andrew Austin, there was also another one splashing the cash. In this case Sir Terence Leahy went up from 7.9% to 8.65% at cybersecurity group Brandshield (BRSD). 11.1% to 12.82% was the rise for the stake held by his fellow shareholder William Currie. The shares were up 49% on the week, but perhaps more important is that the market is finally appreciating BRSD courtesy of Leahy, a former CEO of Tesco.
Disclaimer & Declaration of Interest:
The information, investment views, and recommendations in this Zaks Traders Cafe interview are provided for general information purposes only. Nothing in this interview should be construed as a promotion or solicitation to buy or sell any financial product relating to any companies under discussion or referred to or to engage in or refrain from doing so or engage in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the commentator but no responsibility is accepted for actions based on such opinions or comments. The commentators may or may not hold investments in the companies under discussion.