Is There A Way Back For Afren Plc, Blinkx Plc And Torotrak plc?

At any price, a share represents an even balance of buyers and sellers, of course. But some, particularly small-cap stocks, manage to polarise investors’ opinions — and if you’re on the side that gets it right, you can make a pile.

An oil casualty

Look at Afren (LSE: AFR), for example. The Africa-based explorer has suffered woes, from its CEO and COO being kicked out for making “unauthorized payments“, to the firm struggling to repay some of its debts and needing interim funding to keep going. Along the way there was an aborted takeover approach from Seplat Petroleum — but at least there’s a new CEO on the horizon now.

All of that has battered the shares, which are now down 98% over the past 12 months to just 3.2p. Where do we go from here? It all depends on the outcome of the firm’s future funding and how much dilution existing shareholders stand to face — but at these price levels, a few pence either way could make a massive percentage difference. It’s a big risk for sure, but I really wouldn’t like to try to call it right now.

Is the video star really dead?

Blinkx (LSE: BLNX) was a rising small cap star with its targeted video-advertising technology, and the shares soared as high as 230p in November 2013 — since then they’ve crashed to 34p, for a fall of 85%. What went wrong, and is there a recovery on the cards?

The first crash came in January 2014, when Harvard professor Benjamin Edelman published some harsh criticism of the company. That was followed by a profit warning in July, telling us Blinkx was seeing “lower than forecast demand“, which it blamed partly on the lingering effects of Professor Edelman’s words.

Blinkx’s most recent update this month projected revenue for the year of at least $210m with adjusted EBITDA of at least $3m, with the firm having $90m in the kitty — and a “transformational” year of transition towards mobile and “programmatic” channels was highlighted. With hindsight, I do think the shares were overvalued at their peak, but growth shares often have rocky stops and starts and this is another that I think could go either way — the next two years will surely be critical.

Geared up?

Finally we come to Torotrak (LSE: TRK), a firm that develops variable transmissions and other technology for motor vehicles. For some it’s a potential growth star that’s going to clean up by improving transportation efficiency, while for others it’s a serial disappointment whose shares always seem poised to take off but still haven’t quite managed it. In fact, the shares have been dropping for the past few years, to just 8p today, and we’re still waiting for sustained profit from the company — forecasts suggest we’ll see that happening in 2017.

This month’s trading update sounded upbeat about the firm’s prospects and confirmed the appointment of the new CEO, but made it clear that “additional funding […] is likely to be required during the 2015/16 financial year“. Will Torotrak turn out to be a winner or a loser? Erm…


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Alan Oscroft has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.