Recap of the KNI IPO and share price run
Published 28-AUG-2021 15:00 P.M.
13 minute read
Kuniko Ltd (ASX:KNI) is clearly the biggest story of the week after its 20c IPO traded between 80c to $1.05 during its opening day on Tuesday. Congratulations to the lucky ones who got a rare allocation in the IPO. We added KNI to our portfolio on Tuesday, the day it was listed.
Two days later, the KNI share price went nuts after it released what we thought was a pretty vanilla exploration update. It soared to as high as $3.60 on massive volume, going into a price query trading halt before re-opening on Friday, where it spent the day pretty comfortably bouncing around the $2 mark on an outrageous ~$64M shares traded.
We’ve been investing for a long time but haven’t seen anything like that in years.
We think the KNI share price action during the last two days is a combination of a few things:
- Tiny amount of KNI shares on issue: There are only ~53M KNI shares on issue, and VUL holds over a quarter of them. This, combined with other sticky holders, means there aren't as many shares to go around to anyone who wants to build a long term position.
- Long term investors and VUL holders/followers who missed out on the IPO or didn't get a big enough IPO allocation trying to build a long term position in KNI were buying up shares on market and holding on to them, further reducing the KNI free float every hour.
- Day traders rapidly buying and selling caught hold of KNI on Thursday, and probably amplified the share price swings when combined with long term investors buying and holding their positions.
- KNI’s direct association to VUL’s rise: There is little doubt that VUL is the market darling of the last 2 years, so there was already going to be a huge amount of positive attention on KNI and its tiny 53M shares on issue.
We can’t predict what will happen over the next few weeks, but we think KNI will continue to hold on to a relatively high valuation given the amount of attention on it and low number of shares on issue. Despite KNIs early stage, It looks like many investors are happy to pay a premium price for what they believe could be another successful European Zero Carbon battery metals story, like VUL.
Last week’s KNI share price activity was extreme and we hope that any KNI investors out there have created their own investment plan that works for them and are sticking to it.
We didn’t sell a single KNI share last week. We are long term holders in KNI, so are happy to have the majority of our KNI stock escrowed for 2 years — meaning we can’t sell it until then. For the KNI stock we hold that is NOT escrowed, even if we wanted to sell last week when the price spiked (to free carry as part of our long term investment strategy), we can’t. That’s because we must ALWAYS adhere to our strict trading blackouts that are in place for 3 days after we send an email about a company.
Time to address comments about us in news and social media.
The more we have been succeeding with our long term stock selections, the more new subscribers we are getting, and many are providing us positive feedback.
But in recent months, we also seem to be attracting some negative attention and comments across media, social media, reddit, stock chat rooms etc from people who don’t understand our service.
While some of it has been constructive and we have used it to improve our service (edit: thanks to MC from reddit) - our policy has been to NOT publicly respond to any of the uninformed, unconstructive comments in order to “not give them any more oxygen”.
But when our subscribers start emailing us about it, we felt it was time to address the negative commentary around our company to our subscribers:
Our mission is to use our experience in the markets to build a high performing ASX micro cap stock portfolio and share our long term investment journey with our readers over time.
We are a small team of six and we spend a long time researching the stocks we pick.
We invest in them ourselves.
We say NO to hundreds of investment opportunities each year that we WOULDN’T personally invest in and hence wouldn't share with our readers.
Once we decide to invest, we ALSO request that the company pay us a fee in return for a service of researching, writing and sharing our opinions about our investment in the company over a couple of years.
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We have built a large subscriber following with our track record of selecting stocks that have delivered over time, so naturally there is growing interest in whichever stock that we pick next AND the in the update emails we send about our existing investments.
We can’t control if day traders decide to trade when we send an email update on one of our investments. In addition to being long term holders, we have always had in place trading blackouts for 3 trading days after we send an email about a company.
Our model doesn’t work unless our commentary on our investments and the investment strategies we share are successful at least SOME of the time, which is why carefully selecting the stocks we invest in is critical. The small cap market is risky and we certainly don’t always get it right, but we have been on a pretty good run lately.
So if you see any negative comments about us on the news or internet, remember to come and check our website or email footer where everything about our company and how we operate is fully disclosed and transparent, including:
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While there is a vocal minority out there on the internet that likes to complain about us for whatever reason, thousands of our subscribers appreciate the free service and follow our investment journey in our carefully selected, long term, small cap investments - see some of our reader testimonials.
We are always looking to improve our service and would love to hear from you if you have had a positive or negative experience by following our investment journey - just hit “reply” to this email.
📰 This week on Next Investors
As mentioned, Kuniko (ASX:KNI) was the standout performer of the Next Investors portfolio this week. Shares in the Vulcan Energy spinout listed on the ASX on Tuesday after a heavily oversubscribed IPO, before the stock ended the day up 325% from its 20c listing price.
But that was far from the end of the action for KNI this week. While Wednesday was relatively quiet, Thursday saw the stock jump from its 80c opening price to as high as $3.60 per share after announcing that exploration was underway at its Norwegian battery metals projects.
Alexium International (ASX:AJX) released its annual results yesterday, demonstrating that its commercialisation strategy is starting to deliver. Over the year, AJX realised key commercial and product-line milestones that significantly expand its market opportunities and establish new revenue streams.
Revenues were up 20% for the year, while costs were down a massive 76% — positive trends that we expect will continue to ramp up over the next few quarters as AJX continues executing on its growth strategy in FY2022.
Vulcan Energy (ASX:VUL) announced on Monday that it has appointed Europe’s biggest bank by assets, BNP Paribas, to help with its Bankable Feasibility Study and structuring project finance to build its Zero Carbon Lithium project.
VUL has already signed multiple offtakes agreements for its Zero Carbon Lithium with battery maker LG Chem and auto-giant Renault, plus a rumoured offtake MoU with another auto-giant, Stellantis.
We also reported that German research house, Alster, has released a new research report with a VUL price target of $19.50. You can read more and find a link to that report here:
🗣️ Quick takes on key portfolio company events this week:
Almost nine months into his presidency, it is clear that cybersecurity is a priority for Joe Biden’s administration as it works closely with the public and private sector to address concerns. Biden held talks with some of the USA’s leading technology companies this week to address cybersecurity deficiencies — a “core national security challenge” for the US.
After the meeting, the White House announced that Google had committed to invest $10 billion in cybersecurity over the next five years, while Microsoft said it would invest $20 billion over the same period.
We think that WHK is well placed to take advantage of the growing urgency around cybersecurity protocols in the US.
Minbos Resources (ASX:MNB)
MNB has completed a dry season environmental survey for the Cabinda Phosphate Project, in Angola. This survey, along with the wet season survey completed in May, is critical for completion of Environmental and Social Impact Assessments that are critical path activities for the Cabinda Phosphate Project.
The MNB share price has been in a nice upward trend since late June, and with the share price back above 10c again we are now moving up in 0.5c increments.
Galileo Mining (ASX:GAL)
GAL this week reported that soil sampling targeting palladium and nickel has defined two new priority targets at its Norseman Project, adding to the list of targets for initial drill testing in the next drill program.
GAL’s share price took a pounding in the previous week before their results came out, but the results were good and the share price has now recovered some ground.
Managing Director Brad Underwood has appeared on a video for Samso where he discusses GAL’s recent nickel drilling program, drill targeting using geophysical EM surveys, and the potential for palladium and nickel at the Norseman Project. The video can be found HERE.
Elixir Energy (ASX:EXR)
On Wednesday, EXR provided an operations update in regards to a range of exploration/appraisal activities underway across its Coal Bed Methane project in Mongolia.
These activities all contribute to the systematic building up and de-risking of gas resources across the project area.
We are definitely overdue for an update on what’s been happening with EXR.
Advanced Human Imaging (ASX:AHI)
AHI has further progressed its path to a Nasdaq listing this week. The company announced on Friday the filing of a registration with the SEC relating to a “proposed US public offering of American Depositary Shares, each of which will represent a yet to be determined number of ordinary shares of AHI”.
We are keen to see AHI deliver on its promised NASDAQ listing and will provide an update on AHI soon.
OneView Healthcare (ASX:ONE)
ONE has reported that its cloud-based Care Experience Platform is now available in the Microsoft Azure Marketplace to Azure customers worldwide. This basically means that any hospital that has a big enterprise deal with Microsoft can easily adopt ONE’s cloud based solution for improving hospital patient care experience.
We are looking forward to reading the ONE annual report and management commentary and outlook that’s expected to come out this week.
In our other portfolios 🧬 🦉 🏹
Last Monday, we announced our very first investment in our Finfeed small cap biotech portfolio, Dimerix (ASX:DXB). This week saw DXB announce its first Australian “ethics submission”, which once approved, paves the way for patient recruitment and the beginning of its fully funded Phase 3 trials on its Focal Segmental Glomerulosclerosis (FSGS) therapy.
Visit our Finfeed biotech portfolio
Bod Australia (ASX:BDA) reported its full year financial results, delivering record breaking 25% revenue growth from the previous FY, while driving down its costs at the same time.
As it’s making solid progress, we think it’s only a matter of time before the share price of the medicinal cannabis, cannabidiol (CBD), and hemp healthcare company
starts to turn around from its current near 12-month low.
🏹 Catalyst Hunter
While best known for its nickel project, Aldoro Resources (ASX:ARN) also has a sizeable exploration target for rubidium (Rb) in WA (rubidium is an extremely rare and expensive metal). On Friday, ARN reported that it has defined an initial Exploration Target after re-evaluating historical drill holes at the project. The market was impressed, with the stock closing up 27% on the news.
🌎 Mainstream Media:
Iron Ore (PFE)
Gold (LCL, GTR, TTM, BPM, PUR)
Have a great weekend,
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