The [email protected] Capital (LSE: SYME) share price has been extremely volatile since going public through a reverse takeover. Indeed, over the past year, it has managed to rise from 0.15p to its current price of 0.34p. Nonetheless, it also reached highs of 0.74p last August. Therefore, it’s clear that SYME shares are unpredictable, yet may have have significant upside potential. So, what am I doing about the shares now?
The business model
[email protected] is a young fintech company, which is attempting to offer a new way of inventory financing. This is where companies take out a short-term loan with a bank so that they can purchase products. As an alternative, [email protected] is enabling companies to achieve the same result, without the need to take on debt.
Evidently, this has a number of benefits, especially because companies can avoid incurring debt. This has resulted in a growing number of customers, from 82 a year ago, to 187 this year. That said, the company has delayed its full-year 2020 results release, and it is difficult to judge how the new customers have affected the financials of the company.
It does have to be mentioned that the business is still unprofitable though, and is only generating very small revenues. Based on the youth and uniqueness of the company, there is no guarantee that it will be able to generate profits any time soon. As there is no clear path to profitability for the business, I can see this having a negative impact on the SYME share price in the near future.
Due to the limited history of the company, it is very difficult to judge its future prospects. Despite this, I feel that it is moving in the right direction. For example, at the end of May, the firm acquired TradeFlow. This is a Fintech-powered commodities trade enabler focused on SMEs, and it is hoped that this acquisition will increase the value of [email protected] Investors certainly felt that this was a positive move, with SYME shares rising more than 6% on the day.
Further, [email protected] has recently managed to raise £5.6m through convertible loan notes. This money will be used to support the acquisition of TradeFlow and provide more working capital for the business. I believe that this could help the company in its attempt to grow revenues.
On the other hand, I do have many worries about the stock. For example, it was initially sold to investors on a prospectus showing net assets of £227m, yet on its post-listing balance sheet, net assets were less than £1m. This is a very large problem for any public company, as it does not exactly show management competence. It was no surprise that the SYME share price fell heavily after this was revealed. The fact that the 2020 full-year results have been delayed twice has reinforced my fears.
Am I buying SYME shares?
I can see significant amounts of upside potential, and it certainly has an interesting business model. It could well have a bright future. But I’m staying away from SYME shares. A mixture of poor accounting and a lack of a clear route to profitability makes this company too much of a risk for me.
Stuart Blair has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.