Genedrive (LON: GDR) shares are down 23% in London today. GDR shares have fallen on the results announcement - which wasn’t wholly bad, to be fair. But they’ve gone on to say that clearly they’ve not sufficient capital to be able to grow the company as they wish to grow it. Thus there’s going to have to be another round of financing. Which, in effect, almost certainly means another capital raise.
This is a strategic error. If another capital raise is necessary then have a rights issue and raise it. Don’t announce that you might have to, see the share price drop, then have to issue more shares at the new and lower price. What are you trying to do, deliberately drive up the dilution?
But that’s the announcement: “The Board continuously assesses the Group's requirements and funding options that would bridge the gap before revenue generation allows us to be self-sufficient. The Investor Placing Agreement entered into on 31 March 2023 provided a committed facility of up to £5m and to date the Group has received £2.9m (£2m initial payment and further payments of £0.3m in June, July and November 2023). Further drawdowns are conditional on meeting certain share trading criteria, which are set out in note 6 and were also set out in the Company's circular issued on 24 April 2023 and therefore further drawdowns cannot be considered as guaranteed. The Board is planning for an equity or debt raise in early 2024 to support the growth and development plans of the business and allow the Group to continue to operate as a going concern. The Group does expect to receive an R&D tax credit of c£0.8m in Q1 of 2024 which, if received, would extend the cash runway (absent any further funding received) towards the end of Q1 2024 and provide a longer window for our planned financing activities. The Group's current cash runway is limited; unaudited cash as at 23 November 2023 was £1m and further funding will be required in early 2024 in order to continue as a going concern. The further payment of £0.3m pursuant to the Investor Placing Agreement announced on 29 November 2023 is due to be received shortly.”
It’s just not sensible to say all of that. Announce the rights issue before you drive the share price down, not after.
Genedrive share price from Google Finance
We have to admit we’ve not been fans for a long time of Genedrive: “Genedrive (LON: GDR) shares are up 18%. GDR shares are up on the announcement that they’ve achieved UKCA on one of their tests. This just isn’t worth that much. Sure, the UKCA is required to be able to market it in the UK. But that’s all it is, a piece of paperwork. It’s not - absolutely not - akin to or anything like FDA approval. It’s not, actually, something external to Genedrive even. It’s far more like deciding upon the colour of the packaging box than it is a verification that the test works and people want to buy it. We discussed this earlier about Genedrive: “Think back a bit to when the world was all so very interested in covid tests. Genedrive announced that it had applied for, then received a CE Mark for its test. This set the share price off on a significant romp, hundreds of percents of price rises over time. This of course all faded back as well. Because a CE Mark isn't a thing of any great importance.”
We discussed GDR shares here as well. Let’s just leave it at we’re not fans - sa this premature declaration of the capital raise reinforces for us.