Supply@me Capital (LON: SYME) is now 33% off the highs of only four days ago. The reason why is that SYME decided to raise more capital with a share issue. Well, that's what stock markets are for, to raise capital for companies - to match up our savings and their investment ideas. But while that's the grander economic purpose we out here are also trying to make money out of doing this. Something which a third chopped off a share price in only four days doesn't quite aid us in doing. So, what actually is going on here?
Supply@me Capital calls itself: “SYME, the fintech business which provides an innovative fintech Platform for use by manufacturing and trading companies to access Inventory Monetisation© solutions enabling their businesses to generate cashflow” which is something that could probably use a comma or two. What they really mean is that they're using the whizzy new technology to provide a new and whizzy way of doing something very old. Aiding companies in dealing with their working capital needs. This is an idea which always does face two specific problems. The first is the cost of building out that new technology to do this old thing in the new way.
Supply@me Capital share price from London Stock Exchange
The other issue is - as generations of innovative bankers have found out - that there's a near infinite supply of people who want more working capital. There's a very much more limited supply of those it is worth providing finance to. Thus the real trick in financial markets is not, not really, finding a new way of doing something. It's finding a new group of people who are worth financing. It's not wholly obvious that Supply@me has found this. But such findings do happen, occasionally, and it's often worth taking a bet on whether the new audience can be found.
Our real point here today though is have a look at that share price. So, Supply@me Capital itself needs capital in order to develop the business. That's fine, that's what stock markets are for, as we've already said. But the effect of this is that when that share price starts to motor up there's the new issue to push it back down again. This happens depressingly often in capital hungry sectors. Every rise in the share price is an opportunity to hit the market - and the share price - for more capital. This makes investment in these sorts of innovations something a little difficult. For evidence of success, the thing we desire, might well be followed by a collapse in the share price as a result of a new capital raise.
What this really means is that we've got to get our timings right on such issues. Something that is, sadly, rather difficult to do.
