Omega Diagnostics’ Hail Mary Fundraiser – What Next For The Share Price?

Trade Omega Diagnostics Shares Your Capital Is At Risk
Tim Worstall
Updated: 11 Feb 2022

Key points:

  • A Hail Mary pass is a throw and hope like heck
  • Omega seems to be doing this with their latest share issue
  • They’ve sold the factory, raised money, but what next?
  • Omega Diagnostics Stock Forecast

Omega Diagnostics Group PLC (LON: ODX) shares seem to be following much of the rest of the sector into something like oblivion. Omega has today announced the sale and leaseback of the Alva factory, a significant fundraising at a massive discount to recent share prices and generally, well, umm, what next? For the fundraising is at less than half the price of only two weeks back when they assured us all that the company was nicely cash positive.

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Clearly, something has happened, or even something hasn’t happened. The actual situation is that Omega Diagnostics, in common with many other companies, walked into the brick wall of trying to make covid tests.

We are seeing this with those other companies, Genedrive, Abingdon Health, Avacta. We were indeed in a pandemic and the government was handing out money to those who might be able to make covid tests. Many tried to do so. There’s always the possibility that one or more of them would design something useful and thereby gain a massive order or market.

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This isn’t what seems to have happened though. Several companies, Omega and those listed above among them, have managed to make tests, sure. They’ve also had reasonably sized government orders. Abingdon, famously, couldn’t get government to pay the invoices.

Omega’s problem seems slightly different, in that they expanded production facilities and then the orders didn’t come. So that Alva factory has been sold – for £1 million – and they’re trying to sell the extra equipment bought with DHSC monies. They’re not going to try buying it themselves at Omega.

At which point we should probably conclude that the covid testing market isn’t going to work for Omega. Which is something that leaves the grander shape of the company in something like tatters. That’s also why the fundraise is at this 5p price, one-eighth of the price as recently as November.

In the medium to long term the Omega Diagnostics share price will undoubtedly be determined by whatever the next plan is. That’s the Health and Nutrition business and we can apply whatever value we like to that in that going forward into the future.

In the short term, the Omega share price is going to be determined by technical factors. Obviously, the share price has dropped, significantly, today on the news of that share issuance. Why pay much more than 5p when there are millions of new 5p shares around? What matters to the price in the short term is how many of those have been placed, securely, with long-term investors backing the new strategic vision. If the placing has been with market makers and short-term holders then any attempt at a significant price rise will be met with significant selling. If all is securely placed then there might be room for share price rise.
Longer-term, given that the covid testing business now seems to be near over, Omega Diagnostics depends upon that health and nutrition business. Short term, it’s how much of that stock placing is hanging over the market?

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