Deepverge (LON: DVRG) is down yet another 20% in London this morning. The most basic lesson of which is that you can be in absolutely the right, most fashionable, sector. But that's not enough to prove that you're going to make money - or even have a rising share price. The importance of this is when we examine others in the sector - for which of them might be fashionable but not, in the end, profitable?
As we've noted before Deepverge has been having problems for some time now. Even before this it was down 85% over the past 12 months. That's not just an unfortunate share price move, that's evidence of something deeply wrong with the business model. As we also said the base plan seems sensible enough at first telling: “Deepverge has what sounds, at first, like an entirely sensible business proposition. One of the difficult bits of the biosciences is in getting all the instrumentation to work properly. Equally, pattern recognition over what is actually seen is more than a little, aha, testing. So, a bit of mix and match of IoD (devices connected to the internet) and a sprinkling of AI (for the pattern recognition) and we might be able to upgrade productivity in labs and the biosciences. Sounds like a plan. But of course there's a “might” in there. That 85% Deepverge share dive showing us that reality might not be wholly accommodating to the plan.”
Deepverge share price from London Stock Exchange
The latest fall comes from this: which essentially says they're cutting some lines of work, trying to raise new capital and probably won't be able to issue their accounts on time. None of which is really a positive for the business or the share price.
The lesson for us out here is that a good base idea - or at least an interesting one - plus being in a fashionable field like AI just isn't enough. There also has to be execution of the idea and a line of willing customers ready to pay money for the output. It's that second set of necessities that Deepverge is having problems with.
Which means that we've got to keep a wary eye on fashionable shares in general. Yes, it's fun to rise zooming prices as an area comes into style. But that is only the start of the process - the actual performance of the business will come into play in time.