The [email protected] Capital (LSE:SYME) share price has had a rocky start to being a public company. After going through a reverse takeover, the stock saw a steady decline before suddenly jumping up from around 0.1p to 0.8p. Today it’s trading closer to 0.4p, so it has been quite volatile.
But is the SYME share price about to surge again? And should I be adding the fintech stock to my portfolio?
The volatile [email protected] (SYME) share price
[email protected] provides inventory monetisation services. Using its platform, product manufacturers can quickly raise cash by selling their inventory before finding a customer. How does this work?
It’s a somewhat complex process. But to put it simply, a company sells its inventory on the platform to the creditors of [email protected] This provides quick cash for the business to fund its operations, while the creditors use the inventory as collateral. Then, another company on the platform decides to buy this inventory for their own use at a later date. The money is then used to repay the creditors, and [email protected] takes a small commission for facilitating its services.
Naturally, this can be risky. And is likely a contributor to SYME’s volatile share price. But something that didn’t help matters was the temporary trading suspension in January this year. Generally, suspensions are an indicator that something is seriously wrong. But in the case of [email protected], the reporting calendar was changed that led to a delay in the publication of results. Trading has since resumed.
The management team stated that the underlying business was not affected by this event. And looking at reported figures, I have to agree. The total number of customers throughout 2020 almost doubled from 85 to 165. Simultaneously, gross inventory originations increased by nearly 75% from £1.06bn to £1.84bn.
This ultimately led to revenues for the first six months of 2020 to surge from £11,000 a year before to around £368,000. Needless to say, those are some pretty impressive growth rates. And if they can be sustained, I believe the SYME share price could explode over the long term.
Some risks to consider
While the business appears to be doing well, the volatile share price indicates to me that there remains quite a high level of uncertainty. And rightfully so, in my opinion. [email protected]’s platform can only scale if it can attract businesses to buy another’s inventory. Failing to do that, creditors would likely struggle to recoup their capital and are therefore less likely to purchase any further assets.
What’s more, the business is currently unprofitable and reported a loss of £2.1m in its half-year report. Admittedly £1.4m of this was from one-time charges related to its public listing. But the firm is still ultimately dependent on external financing to keep the lights on.
The bottom line
[email protected] sounds like an exciting business. It has basically found a way to perform inventory financing but without a company taking on any debt. This, to me, sounds like it has potential, especially since the inventory financing market is estimated to be worth around £1.1trn.
But personally, I think it’s a bit too soon to invest. I’d rather wait and see how the business and SYME share price performs throughout 2021 before adding any shares to my portfolio.
Zaven Boyrazian does not own shares in [email protected] Capital. 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.