The Supply@ME Capital (LSE: SYME) share price has had a tough past five days as the price has tumbled nearly 20% at the time I’m writing. For the past year, the share price has dropped by a staggering 56%+. Although volatility surrounding penny stocks isn’t uncommon, I’m still worried about how much further the share price might have to fall.
Investors have become bearish this week following the fintech company’s release of its financial forecast for the year. So, would it be best for me to follow suit and avoid this stock?
New short-term loan facility with ARC group
There was an early bounce-back in the Supply@ME Capital share price today and it jumped by almost 10%, although it’s down as of lunchtime Friday. The early rise followed news that the company has secured a short-term loan facility with investment bank ARC group. The deal will see an initial loan of £5m with a further investment of £2m in the next 60 days. This deal will replace Supply@ME Capital’s existing loan with Negma Group, which will receive 840m new shares with £2.1m paid back in cash.
Supply@ME Capital is looking to build a strong relationship with ARC as it continues to generate capital from investors with the added possibility of a dual listing on NASDAQ with ARC. Indeed, I think this deal could be a promising prospect for SYME as international investors will be crucial for building momentum for this penny stock.
SYME financial forecast
The company expects to generate consolidated revenue of around £3.8m-£4.9m in the year ending December 2021. This figure is based on proposed fees charged by the group. SYME directors expect revenue to hit similar sums by the end of December 2022. They also said this forecast is not reflective of any contribution from Capital Bank funding, the deployment of the International Chamber of Commerce partnership, or the execution of Sharia-compliant inventory monetisation transactions.
This report shows us that SYME is continuing to produce revenue and has good prospects for the future. However, for investors who were hoping for some more direction in terms of profits, they could be waiting a while. This lack of direction could explain the drop in the share price.
Other risks to consider
As touched upon before, SYME will need investor support to get off the ground. However, it’s becoming apparent that this company is heavily reliant on third-party investors. This reliance could spark some volatility in the future.
In addition, I think it’s important to note the competitive nature of the fintech industry. As an emerging company, SYME could struggle as other big companies such as PayPal continue to dominate the sector.
Will I be buying?
Supply@ME capital is proving to be popular with investment banks (such as Negma and ARC group, as their involvement shows), so as long as the company continues to receive monetary backing, I don’t think I will take this share off my watchlist.
However, I’m less inclined to buy it at the moment until I see more direction in the way of generating profits and more consistency in the Supply@ME Capital share price. So for now , I’ll play a waiting game and see how this stock develops.
