In less than two weeks, the Helium One (LSE: HE1) share price has risen 1,373%. If I’d bought £1,000 of the shares on 24 January, I’d have nearly £15,000 on 6 February.
The scarcely believable rise followed a buying frenzy. On the Hargreaves Lansdown platform last week, investors bought more Helium One stock than any other. The stock made up around 13% of all buy orders.
So why have investors been piling in? And with the shares still trading at a tiny-sounding 3p, is there a buying opportunity here? Let’s look at both questions.
Noble gas
Helium One, as you may have guessed, is in the business of helium gas. At least, it plans to be. It hasn’t sold any of the stuff yet. The firm is drilling for reservoirs of the element much like an oil company might drill to find oil.
The surge in the share price followed good news from a well in Tanzania. The team drilled the Itumbula well to 961m and discovered copious amounts of helium and also hydrogen.
CEO Lorna Blaisse said the province “has the potential to be one of the largest sources of primary helium globally.”
Concentrate
She also explained how existing helium wells in the US and Canada produce helium at concentrations of 0.5% or so. The Itumbula well? A concentration of 4.7%.
Demand for helium is strong as the world battles an ongoing supply crisis. The gas has a wide range of industrial applications that should sustain demand in the future too. It’s particularly used in cooling and lasers. For example, you can thank helium each time you scan a barcode at the supermarket.
With such a rosy outlook, am I going to buy the shares today? Well, the first thing I notice is this is not a big industry. Most existing sources produce the gas as a side product whereas Helium One is a pure helium play. It’s also the only company of its type on the London Stock Exchange.
What this means is I don’t have many companies to compare it to That makes valuing the shares difficult.
Likewise, the company is pre-revenue and pre-production. I can’t even find an estimate of the value of the reserves on any publicly released document. Put simply, whether the shares are 3p or 30p, it’s tricky for me to see whether they’re cheap or overvalued.
Am I buying?
There’s a dilution risk as well. The shares have risen rapidly but are still some way off the all-time high of 28p back in 2021. The unluckiest investors could be down as much as 90%.
Management isn’t forthcoming on the current cash reserves either. So I can’t assess the risk of any shares I buy being diluted before cash starts to flow into the business.
Overall, the company could have a bright future. However, the lack of quantitative information puts me off buying for my portfolio.
