Abingdon Health has just announced that it is launching its lateral flow test for covid along with the associated CE mark. Given that a CE mark is a requirement for wider European marketing of those lateral flow tests this looks like a significant positive for the Abingdon stock. After all, when Genedrive announced the same thing – as we pointed out about Genedrive – that share price soared 250% even if it has now fallen back to only 100% up.
Do something that has been a grand success for someone else in the same space? What could go wrong? Well, what could go wrong is that no one seems very excited by this second announcement which could be what’s happening to Abingdon Health today.
The secret here is that share valuations are about confidence. Does the market have confidence in future revenue predictions, in management’s ability to deliver, in effect, confidence in the stories that are being told? For that’s what everything about a company is, a set of stories about what might or will happen in the future.
If the people trading in the market don’t believe the stories – or even believe them about one company and not about another – then they’ll not move the share price as we might think given objective facts.
The problem Abingdon Health has at present is that the last round of excitement in the company’s prospects didn’t work out so well. Abingdon gained contracts to supply tests in the pandemic lockdown and further work on purchasing materials for many more tests. But, as the company announced, DHSC is remarkably reluctant to pay the invoices for all of this. Abingdon Health has had a share placing to bolster working capital to cover this.
So, Abingdon makes a similar to Genedrive announcement about CE marks. But while that Genedrive price soared the Abingdon one has picked up 10% this morning then, at pixel time, slid back to where it started. Why this considerable difference in reaction to what is, after all, a very similar event?
Confidence, that’s what. Whether the market should be or shouldn’t be it is a little more wary of Abingdon than it is of Genedrive. That’s just reality.
Of course, it’s what happens next that matters. Abingdon Health might launch their tests and do very well out of doing so. At which point the price could soar on that dual pressure. Firstly that the tests are selling well, secondly on that swooshing return of confidence in the company’s prospects. But that’s what any Abingdon trade is about at present. Genedrive jumped on hopes about the future success. Abingdon – righteously or not – may well have to wait to show actual success before any similar price movements.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.