The [email protected] Capital (LSE: SYME) share price has surged in value during the past month. Shares in the small-cap have risen around 1,000% over the past four weeks.
This performance has put the company on the radar of most small-cap investors. The improving investor sentiment towards the business could send the [email protected] Capital share price even higher in the near term.
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If you’re interested in owning a share of this high growth small-cap, here’s what you need to know before investing.
Time to buy the [email protected] Capital share price?
[email protected] Capital started its life as Abal Group. Following the completion of the disposal of its core operating business (known as Imaginatik), the firm became a cash shell and dealing in its shares was suspended.
Abel changed its name earlier this year after the company agreed on the acquisition of [email protected] Srl. Trading in its shares has since resumed.
[email protected] is an early-stage financial technology, or FinTech business. It operates a technology platform that enables manufacturing and trading customers to improve their working capital position by releasing capital from their inventory stock.
The business model is similar to other peer-to-peer lenders. The company matches capital invested by its inventory funders to enterprises that need money. The platform earns a fee on the income generated from the loans and “inventory monetisation“.
As the business is only just getting started, it isn’t easy to figure out how much the [email protected] Capital share price is worth. That said, it’s clear the company has tremendous potential.
It originated more than €300m of prospective “inventory monetisation transactions” in its first six months of operation. Meanwhile, it’s estimated that the total size of the inventory financing market is €2trn.
If this FinTech business can grab just 1% of the total addressable market, the [email protected] Capital share price may be able to continue its impressive performance. That 1% could mean €200bn of prospective inventory monetisation transactions for the firm. By comparison, the current market capitalisation of the group is just over £100m.
Therefore, the [email protected] Capital share price looks cheap based on its potential market.
Diversification is key
However, it could be some time before the company reaches this point. Small-cap companies are notorious for missing their targets. Investors shouldn’t overlook this fact when evaluating [email protected], no matter how attractive the opportunity might seem.
Many peer-to-peer companies have failed to live up to expectations in the past. Some of these companies have caused substantial losses for their shareholders and funders on platforms.
As such, it may be best for investors who want to own the [email protected] Capital share price to do so as part of a well-diversified portfolio. The company’s potential market is enormous. But we can’t overlook the fact that so many peer-to-peer companies have struggled to make it to the big time over the past decade.
Owning the stock in a diversified portfolio would allow shareholders to benefit from any upside while limiting downside risk.
