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STOCK MARKET NEWS – THE DAY/WEEK IN SMALL CAPS

The Week In Small Caps: September 3

03/09/2023

The Week In Small Caps: September 3

The FTSE 100 ended the week up 1.75%, with the Small Caps index up 1.4%. However, while the blue chip index is back to flat on the year, the minnows are still down 2%, and it has to be said, it feels as though it is down 20%. Indeed, given the political uncertainty, the way that the powers that be have persistently hamstrung investors and corporates, just 2% down is quite a result. It is to be hoped that the support for small caps is coming from those looking to fill their ISA’s and via AIM make their assets more IHT friendly.

Pantheon Resources

Leading the way in the small cap space this week was perhaps a somewhat unlikely candidate, given the recent history of the stock: Pantheon Resources (PANR). The shares have previously been blighted by the shorters (what a surprise), and perhaps an inability of management to get both the message across, as well as the kind of slings and arrows one might expect in any potential growth situation. However, the resource estimate for Kodiak, and Executive Chairman David Hobbs buying £164,000 of shares at 16p focused mined. The 82% rise for the stock over the week presumably was backed by bears closing their positions in something of a hurry. Interestingly, the shares already looked like a charting buy at the end of the previous week with the trendline breaking close at 13.6p on August 25. So, presumably one or two traders successfully guessed a turnaround was on its way or we keeping a close eye on Bulletin Board Heroes.

Physiomics 

One of the rules of a small cap bear market is that companies have to pull rabbits out of hats, to surprise investors with good news. Physiomics (PYC) managed to do this off the back of a fresh contract with pharma giant Merck. The shares of the oncology drug development group rose 61% on the week. But perhaps given the way the company was already dealing with a massive counterparty, one wonders why the market had not already given the now £2m market cap company a higher value? Perhaps it will get on with doing this from now.

Wildcat Petroleum

Another company where the penny may have dropped / the share price has risen is Wildcat Petroleum (WCAT). Here the Sudan focused company (apparently it is lovely there this time of year), already announced at the end of June that it had found a potential $25m investor. Last month Chairman Mandhir Singh bought 1.1m shares at 0.3p for his SIPP. The market being the market did not react in a meaningful way until this week when the stock rebounded 53%. There could be more upside given the way that WCAT at 0.37p is still well below where it was on June 26 when the potential investor was announced.

Gfinity

For Gfinity (GFIN), it would appear that all last month’s changes at the group were finally given the thumbs up by the market, after a modest delay. Here the e-sports and gaming group, where investors have not exactly had a pleasant ride to date, looks to have got its act together, both with the appointment of David Halley as CEO, and a £450,000 fund raise. The sizzle here is that Tourbillon of which Halley is a director, bought a significant stake in a GFIN subsidiary a few months back. The shares were up 45%, and hopefully investors here will have a  positive result well before Halley’s eponymous comet returns in 2061.

Guild Esports 

Another delayed reaction in a space not a million miles away was at Guild Esports (GILD). Alas for anyone over 50 years old (arguably still the majority of investors), their knowledge of the space began with Pong and finished with Pac-Man. Therefore, news regarding Counter-Strike or Secretlab probably does not have as much impact as it should. But what did move the dial this week was the launch of the new Street Fighter team. Presumably, this has nothing to do with the Rolling Stones song. But it meant that GILD was up nearly 30% over a 5 day period.

Insig AI

Alas, after a brutal bear market in the small cap space, there are not as many stock market legends to follow. While Andrew “42x” Austin is still on the front foot, many of the “Mavericks” of the pandemic bubble and before, are no more. Someone who is still very much in play is Richard Berstein at Insig AI (INSG). He bought 100,000 shares on Wednesday. INSG shares closed the week at 22.5p.

URA Holdings

Speaking of Andrew Austin, he ploughed £50,000 into URA Holdings (URAH) via a CLN in May, and one would have thought that given his track record the shares would have soared at the time. This may still be the case, but the emerald mine exploration company this week took itself further towards production at its flagship Gravelotte mine. There is clearly ongoing work being carried out on the ground, with the latest £240,000 fund raise taking the company to its goal of restarting operations. The board putting in 10% of the raise is an obvious plus.

Power Metal Resources

Away from the big risers of the week there were some stocks to keep an eye in September, as we look to the larger market participants to finally come back from their yachts. Power Metal Resources (POW) provided a comprehensive update on Thursday, highlighting three of its high priority exploration programmes. Things seem to be moving forward well under the leadership of new CEO Sean Wade. If nothing else the coverage that the company had this week from USA stock legend Rick Rule, who is an investor in the company, should shine a very positive light on the company. It is difficult to imagine that the shares will not step up off recent support near 0.7p over the course of the autumn.

Ananda Developments

As we are aware, the market does not always instantly give the appropriate reaction to a company’s news. In the case of Ananda Development (AQSE:ANA) it remains something of a head scratcher that last month’s NHS funding news did not see the shares fly. A £5m market cap for a company  developing cannabinoid medicines for the treatment of chronic inflammatory pain conditions, seems paltry, especially given the addressable market.

Zenith Energy

Given that I attempt to read every RNS issued by small cap companies, it is always pleasant when there is one that stands out from the crowd. Zenith Energy (ZEN) may sound like a somewhat unlikely candidate for such an accolade, but this week’s announcement that it has acquired a US listed company to be used as an acquisition vehicle, sounded like a rather canny move. The idea that ZEN will be able to use this vehicle Cyber Apps World to raise cash of course gets around the fact that at the moment raising money for anything on the UK market remains something of a challenge.

Firering

It was something of a surprise that shares of Firering (FRG) remained flat on the week, despite the way that the company deliver a quite busy update on Wednesday. Now at 7.25p the stock has been as high as 16p in the past year. Given the way that commissioning has begun at Lime Plant, and FRG reminded us that it has an option to acquire up to 28% of Limeco, which should be profitable and within 12-24 months, the waiting game and the pullback in the stock should be near to a turnaround.

i3 Energy

On the subject of turnarounds, we are starting to see i3 Energy (I3E) deliver one. This process is being helped along by a resurgence in crude oil prices. As well as this it looks as though the market has absorbed the idea that increased production, especially from undeveloped Canadian reserves is going to turn the tide of the share price, which is currently (unfairly) near where it was at the beginning of last year, despite all the achievements under the bridge since such as debt facility completion and loan notes redemption. The market looks to now be over the dividend concerns at the start of the summer.

Bears

Finally, regular readers of The Week In Small Caps will be aware that I do enjoy looking on the bright side in terms of companies that the bears have their teeth into. Normally, we see a mix of personal attacks, only mentioning the negative points, and then exaggerating the negatives – of course. The final part of the shorting playbook is to conflate with a shameless confidence, aspects which are nothing to do with each other, as another bear point. The golden rule is once a bear is on a company it will never let go, and of course, never admit error. Self-appointed keyboard warriors in a bear market will obviously have a good chance of getting things right, especially with growth companies who have the fundamental table tipped against them. But just throwing mud at companies hoping that some will stick is not journalism, and certainly not helping anyone else other than the writer benefit from click bait.

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.

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