Tiny HealthTech stock ResApp Health [ASX:RAP] is flying today.
The share price is currently up 24.4% at the time of writing, thanks to a somewhat unexpected turn of events. Pharmaceutical giant Pfizer has decided it wants what ResApp has — lobbing an 11.5-cent per share takeover bid at the small-cap.
It should be a big win for shareholders who have jumped into ResApp since mid-2020.
But for those that have been invested in this stock for longer than that, today’s news may be somewhat of a letdown.
Let’s take a closer look at the details…
Timely deal or bargain pick up?
It’s fair to say that in the pandemic tech boom of 2020, ResApp was hoping to be a big winner.
Management pivoted their diagnostic app into the crowded space of proposed COVID solutions. To this day, that plan is still in place, undertaking trials to test the capability of their cough sampling and screening.
Unfortunately, though, the process has been a lengthy and involved one. Getting their app to a point that it is commercially viable hasn’t been as easy as many investors likely hoped — a fact that has been evident by the volatile downswing in the company’s share price for much of last year.
But in recent months, the outlook has been improving.
ResApp has finally managed to make some headway in the lab and in real-world testing. For that reason, it seems like a very timely decision for Pfizer to scoop up this company and its intellectual property.
After all, under the proposed offer, ResApp has been valued at close to $100 million. It’s a fairly small price to pay for Pfizer for what may end up being a pivotal tool for future COVID outbreaks.
As ResApp’s CEO and Managing Director Tony Keating commented:
‘We are excited by the prospect of this acquisition by Pfizer, a leading biopharmaceutical company that shares our vision and belief that technology can help transform healthcare and improve patients’ lives. The proposed acquisition recognises the years of dedicated work by the ResApp team to build ResApp into a leader in audiobased analysis of respiratory health. We believe that the material premium and certainty of an all cash consideration is an attractive outcome for our shareholders.’
What’s next for ResApp investors?
With the takeover seemingly receiving management’s blessing, it seems likely that the deal should go ahead. It would have to require a serious revolt from shareholders to stop it.
Granted, there is the possibility of a rival bidder coming into the mix too. But I certainly wouldn’t be counting on that.
The most likely outcome, for better or worse, is that this 11.5-cent per share bid will get the greenlight.
A solid win for short-term holders, but a potential loss for their long-term counterparts.
This result is hardly uncommon for small caps, though. It is par for the course to see bigger competitors try to absorb smaller firms into their operations. It’s a strategy that helps them maintain their position at the top of the market.
For individual investors like yourself, though, it is also a great way to make quick returns. If you can spot the disruptive potential in smaller companies, you may be able to pocket fast profits like ResApp shareholders have today.
And if you’re looking for a good place to start, then check out these seven stocks here.
It’s a compiled list of some of our favourite small caps on the market right now. And with any luck, they could be your ticket to generating some solid wealth for yourself.
Regards,
Ryan Clarkson-Ledward,
For Money Morning
