Key points:
- Nanosyth shares fell by 14.54% after reiterating its growth strategy.
- The firm is relying on acquisitions to expand its operations and income.
- However, investors are getting impatient with the lack of acquisitions.
Shares of Nanosynth Group PLC (LON: NNN) fell 14.54% after reiterating that its growth strategy is still primarily driven by acquisitions. The nanoparticles company was reacting to enquiries from investors regarding its growth plans.
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The adverse reaction from investors indicated that they were unconvinced by Nanosynth’s response. Previously known as Remote Monitored Systems, the company is betting on its CEO and COO to acquire other businesses soon.
Nanosynth announced a bonus scheme for its CEO Mark Duffin in the form of options over million shares and a cash bonus of £270,000 ($365,445), with its COO Jeremy McNamara would get options over 57 million shares and a cash bonus of £180,000 once they complete a significant acquisition.
The incentive program was announced on 10 February 2022, but the two executives are yet to announce a significant acquisition worth at least £10 million. Investors are growing impatient with how long it has taken for the company to make an acquisition.
However, while the impatience is understandable, I believe the two executives are thoroughly vetting the companies they want to acquire, given the sum they want to invest. I think they should not make a rushed decision to please their investors since the long term effect of a wrong acquisition could be severe.
To put things into perspective, private equity firms and other investment funds usually take months to vet their potential acquisition targets before making a firm offer. Famous investors like Warren Buffett and George Soros have been known to take over a year to make new acquisitions.
Prudent managers and investors know that it is best to take a long time vetting potential acquisition targets before committing to the one that stands out from the rest of the crowd since excellent acquisitions tend to pay off for many years.
Nanosynth shares were down 14.54% at writing, driven by investors' adverse reaction.
As investors wait for Nanosynth to announce its subsequent acquisition, we can look at its last major announcement. The nanoparticles company announced in February that Volz Holdings, its partner in the Virosynth joint venture, has agreed to convert its production line to include its alphaviron layer across its entire product range.
Nanosynth decided to issue warrants worth GBP500,000 covering 50 million of its common shares exercisable at 1 pence each over the next three years. The warrants were issued instead of cash consideration.
Investors should wait for the company to announce its next acquisition target.
*This is not investment advice. Always do your due diligence before making investment decisions.