Perhaps the best thing about the Government’s present woes as far as small caps are concerned is that we are already bumping along the bottom, or at least hope that we are.
So the minnows should not be too affected. Given that the current mood seems to be that the Sunak tax hikes should be restored, any corporation tax rise is presumably in the market already. The Truss administration in the meantime continues to count the cost of delivering on a promise/acting immediately, and “going for growth.” The Black Wednesday feel to everything though, does rather underline how important it is to have a strong electoral mandate before taking radical measures.
The Small Cap Index
The FTSE Small Cap index is quite revealing currently for a couple of reasons. The first is that before the pandemic it was peaking near 6,000, while once the furlough cheques came in it rallied to 7,500. So 6,000 is key. This week the index closed at 5,730, so it would appear we have the look of going back into difficult territory, analogous to the FTSE 100 being below 7,000.
What is clear as far as small caps are concerned at this point in the cycle, is that in order for share prices to flourish, something rather special has to be pulled out of the hat. This point was underlined at Alkemy Capital (ALK), as it said its subsidiary Tees Valley Lithium Ltd is collaborating with BP (BP.) (yes, that BP) subsidiary bp Alternative Energy Investments Ltd on green hydrogen. One would venture to suggest that BP is nothing to be sniffed at given that Alkemy is currently just a £7m market cap company.
Amigo (AMGO) also managed to achieve a win as the Man From Del Monte a.k.a the Financial Conduct Authority, gave the lender permission to get lending again for the first time in nearly two years. It remains a blight on companies, and their shareholders, that in an electronic age things take so long to resolve.
Drug development group Evgen Pharma (EVG), saw its shares maintain most of its recent gains as it announced the start of a pharmacokinetic/pharmacodynamic trial and that it will commence an Investigator Sponsored clinical study for the glioblastoma programme. The kicker here was including the magic acronym FDA in the RNS. This came after a SFX-01 licensing deal for up to $160.5m. Given that the market cap is currently £13m, some may say the market is adopting a wait and see stance.
Although one may not be entirely sure whether it will be EV’s or hydrogen that will win the battle over coming years, it is certainly the case that investors are jockeying for position, in terms of who they think will prevail. In the lithium mining space it can currently be said that stock du jour is CleanTech (CTL). The twist here is that this is a company with sustainable lithium projects in Chile, rather than the usual (non-clean?) variety. This week the company said it was moving forward process test-work with SunResin on multiple fronts.
Cash may be king in the current environment, but the so far disastrous Green Lobby notwithstanding, so is coal. This realisation has finally got the share price of Edenville (EDV) out of its slumber, with a one third rise over the week. The reason for the joy was the revelation that production has resumed at Rukwa, Tanzania. Given the present energy crisis one would imagine that the coal is selling like hot cakes – so to speak.
News that long income group Dukemount Capital (DKE) has turned itself into a reverse takeover target was met by the shares tripling during the week to the 0.2p zone, and a £1m market cap. Observers of the situation have described the company as now being the cheapest shell around, with the attached question being how much this would be worth to a third party? One might imagine rather more even than the present humble valuation of DKE. It is not too strange that after last December’s Kamikaze measures on minimum listing valuations in December 2021 the number of new IPOs has fallen off a cliff, with the drying up of liquidity since the beginning of the year making matters worse. It would seem that the powers that be dislike not only small caps, but also retail investors making (and of course losing) money in this space. Of course, then we hear the moans that the London market is losing its edge over international rivals. At least for DKE all of this means potential RTO candidates should be buzzing around in terms of interest regarding a potential deal.
The week ended on a high note with a Powerhouse Energy (PHE) shareholder interview, in this case major shareholder Howard White. The podcast was received as a decent appraisal of the recent history of the waste plastic to energy company, with the shares up over 50% on the day. It was well timed, as given the energy crisis, the rollout of plants to make syngas and hydrogen is all the more important. With appropriate management changes in place, it seems we may see the past logjams cleared ahead of the first plant being built.
Finally, it is interesting that there are so many financial websites, PR platforms and commentators out there claiming to offer investors knowledge, and CEOs reach in the market. But how many actually do the job? Some seem to be just box-ticking offerings so PLCs can say that have met their PR obligations, and all they get is a canned service with no one reading/listening. Others, simply do not have the reach or seem to be run by used car salesmen, and those claiming to be investors. For actual investors, it is a jungle out there: with the “highlight” being bulletin boards and Telegram full of keyboard warriors.
Hopefully, one day the current Wild West situation will be resolved and the cowboys will fade into the distance. Then again, it may be too much to expect that we will get the analyst/journalist / stockbroker-level content we all deserve. What is certain is that in the current environment for small-cap companies, solid/balanced research, and rather less cynicism – especially not celebrating when things go wrong, would be much more helpful.
Disclaimer & Declaration of Interest
The information, investment views and recommendations in this article are provided for general information purposes only. Nothing in this article should be construed as a solicitation to buy or sell any financial product relating to any companies under discussion or to engage in or refrain from doing so or engaging in any other transaction. Any opinions or comments are made to the best of the knowledge and belief of the writer but no responsibility is accepted for actions based on such opinions or comments. Vox Markets may receive payment from companies mentioned for enhanced profiling or publication presence. The writer may or may not hold investments in the companies under discussion.
If anyone reads this article found it useful, helpful? Then please subscribe www.share-talk.com or follow SHARE TALK on our Twitter page for future updates.
Terms of Website Use
All information is provided on an as-is basis. Where we allow Bloggers to publish articles on our platform please note these are not our opinions or views and we have no affiliation with the companies mentioned