What’s going on with the Supply@Me (SYME) share price?

The Supply@Me (SYME) share price has fallen significantly, but is this a buying opportunity? Zaven Boyrazian investigates.

| More on:

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

Back in May, I decided that the Supply@Me Capital (LSE:SYME) share price was significantly overvalued. And based on the price today, it seems that was an astute conclusion. The stock has since declined by around 32%, bringing its 12-month performance to a disappointing -60%.

Seeing such volatility in a penny stock is hardly surprising. But is this collapse in market capitalisation an opportunity to buy the shares at a discount? Let’s take a look.

The volatile SYME share price

As a reminder, Supply@Me is a fintech company specialising in inventory monetisation. This is a fairly complex business. But put simply, it enables companies to cover the costs of their suppliers before actually selling any products. Traditionally, this is done using loans where the products are held as collateral. But under Supply@Me’s platform, a customer could achieve the same result without taking on debt.

That certainly sounds promising. And it seems its customers agree as the management team expects total revenue for the year to come in at £3.9m to £4.9m. By comparison, revenue in 2020 was £416,000, indicating a potential 10x increase. Needless to say, that’s a positive sign. So why did the SYME share price continue falling on this guidance?

The Supply@Me SYME share price has its risks

The risks continue to mount

Despite the enormous revenue growth, profits still elude this business, meaning it remains dependent on external funding. And with such a lofty valuation attached to this penny stock, it seems investors were simply expecting more growth. As a consequence, the SYME share price has tumbled.

Supply@Me recently secured a new £5m loan with an additional £2m available as of early December. This loan undoubtedly provides some breathing room, as well as bolsters the balance sheet. That may be why the SYME share price jumped slightly on the news.

However, I remain cautious about the announcement, as this loan comes with a 10% interest rate. And with no profits to cover this expense, any slowdown in growth could have some significant adverse impacts on the financial health of this business. Therefore, I would not be surprised if Supply@Me has to turn to shareholders to raise additional capital in the future through an equity issue. Equity dilution in young businesses is not uncommon. But it will harm the SYME share price if management cannot use the raised capital effectively.

The bottom line

It’s pretty difficult to judge Supply@Me in its current state. The business ultimately remains unproven. But the rising level of revenue clearly shows it has a platform that customers are interested in. What’s more, it recently acquired an investment advisory recurring revenue stream through the acquisition of TradeFlow.

I continue to be intrigued by this company. However, it’s become clear that it remains dependent on third-party funding. And if that capital were to disappear, the penny stock could potentially go to zero. Therefore, all things considered, I’m keeping it on my watchlist for now.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Zaven Boyrazian 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.

More on Investing Articles

Investing Articles

Up 26%, can the BT share price really push higher still?

The BT share price has surged on several catalysts in 2024, but there’s evidence to suggest that the stock could…

Read more »

Man writing 'now' having crossed out 'later', 'tomorrow' and 'next week'
Investing Articles

What are the best dividend shares to buy right now?

As shares in B&M European Value Retail have fallen, the dividend yield has reached a 10-year high. Should investors be…

Read more »

Surprised Black girl holding teddy bear toy on Christmas
Investing Articles

My favourite FTSE 100 passive income stock that keeps the Christmas coffers full

The holiday season is expensive and can leave many consumers struggling to make ends meet. Here’s how I use a…

Read more »

Investing Articles

The latest growth forecasts suggest the Glencore share price will hit 555p!

Harvey Jones has been disappointed by the performance of the Glencore share price since he bought the commodity stock last…

Read more »

Dividend Shares

A closer look at the 11% dividend yield forecast for Phoenix Group shares

Phoenix Group shares have one of the highest dividend yields in the FTSE 100 index today. Could this be a…

Read more »

Investing Articles

If I’d put £25,000 into the FTSE 350 at the start of 2024, here’s how much I’d have today!

Many FTSE shares have rebounded this year as interest rates look set to keep heading lower and market appetite for…

Read more »

Investing Articles

Up 40%, but experts forecast the easyJet share price could soon hit 664p! Time to buy?

The easyJet share price has been flying lately and stock analysts are predicting more fun to come. But there's only…

Read more »

Storytelling image of a multiethnic senior couple in love - Elderly married couple dating outdoors, love emotions and feelings
Investing Articles

Worried about tax raids? Here’s how I’m targeting a £44,526 passive income with shares

Investing in a Self-Invested Personal Pension (SIPP) or Individual Savings Account (ISA) can supercharge one's passive income, says Royston Wild.

Read more »