It’s been a wild day of trading for AnteoTech Ltd [ASX:ADO].
After opening higher, shares in the company began to fall just an hour after trading. With the share price currently sitting at 32 cents, down 5.8% for the day.
A somewhat surprising turn of events considering the company delivered a positive announcement this morning.
So is this simply a case of profit taking, or something more convoluted?
Brisbane manufacturing facility in the pipeline
The big news out of AnteoTech is the fact that its plans for ‘in-house production’ are now laid bare. With the company noting that its Brisbane-based manufacturing facility will provide 12 million additional test strips per annum.
Albeit, the facility itself won’t come online until early 2022. A distant timeframe that may have some investors worried that AnteoTech will have missed the boat by that stage.
After all, COVID-19 testing is a priority now. And while it may still be a priority in 18 months, it may not as well.
Nevertheless, it’s a noteworthy win for the company. Putting them on a trajectory to take advantage of the ‘anticipated demand’ from their EuGeni reader platform.
As CEO Derek Thomson commented:
‘Our manufacturing strategy will enable AnteoTech to produce tests inexpensively and efficiently. Implementation of lateral flow test strip manufacture inhouse will enable us to produce new products and get them into the market without lengthy technical transfer processes to third parties.
‘This will increase our speed to market and ensure quality. Our current lateral flow test strip capacity from Operon is 20 million lateral flow strips per year. Our initial investment in Brisbane will increase that capacity by an estimated 12 million lateral flow strips per year. We will increase this capability as required as EuGeni test demand across the entire range of tests we produce grows.’
So for all intents and purposes, this should have been a solid win for the company.
Which begs the question, why has the share price fallen?
AnteoTech’s investor disparity
Profit taking is of course one possible reason for today’s share price fall. With the potential for a number of investors looking to cash out.
But more importantly, it could be a case of sophisticated investors cashing out in particular.
After all, on 28 April the company wrapped up a $12 million placement to sophisticated investors. Issuing 46.2 million new shares at 26 cents a pop. Allowing these investors to potentially make a quick profit.
Granted, this same offer was also extended to retail investors for up to $30,000 worth of new shares.
Which, as AnteoTech announced on Thursday, raised a further $8 million. Double the original goal of $4 million. So retail support is clearly strong. Which would seemingly counteract the profit-taking thesis.
With that in mind, perhaps investors were simply expecting better news.
Because while in-house manufacturing is fantastic, it doesn’t provide any concrete estimate for shareholder returns. Especially when it won’t even be ready until 2022. Meaning the possibility for further capital raises or share placements may be likely.
All in all, there are plenty of conflicting reasons for the volatile movements of this stock.
And for that reason, investors will need to do their due diligence before committing to it.
For more small-cap ideas, including a handful of hidden gems, check out this list of four stocks that can’t be ignored.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
PS: Our publication Money Morning is a fantastic place to start on your investment journey. We talk about the big trends driving the most innovative stocks on the ASX. Learn all about it here
