The Sensyne Health PLC (LON: SENS) share price crashed 65.2% as investors reacted to its latest update covering its commercial activities, formal sale process, trading results and proposed financing.
Investors were spooked by the company’s admission that it might be unable to keep operating past early February with its current cash reserves, which stood at £2.8 million on 12 January 2022.
However, investors ignored the rest of the release, which contained multiple positive milestones from the company, including signing two agreements worth £0.5 million on 24 December 2021.
The negative reaction is justified to a certain extent, given that regardless of how good a company’s prospects are, investors cannot reap a return if the company goes under after failing to meet its financial obligations.
Turning to some of the report’s highlights, Sensyne Health told investors that it has a deal pipeline worth over £29 million that could be recognised within the current financial year. However, there are no guarantees that any of the 75 different contracts currently being considered will be signed by the end of the year. Hence, the recognised revenues could be much lower than currently expected.
Sensyne also highlighted the numerous partnerships it had signed with UK and US health organisations that approve of its business model, which anonymises patient data before sharing it with life sciences companies.
The company said that competition within the sector is heating up as more firms enter the space offering customers direct patient data, which is not anonymised. Still, it believes that its model will win over the long term.
The firm also said it is in negotiations with potential suitors as the formal sale process (FSP) progresses. It is in detailed discussions with multiple parties interested in acquiring it but couldn’t share more due to non-disclosure agreements.
However, the company warned investors that it needs to raise money quickly since the FSP would not be completed by early February when it is likely to run of cash.
There were many positives in today’s press release, including Sensyne signing a non-binding term sheet with institutional shareholders willing to provide the company with £6.35 million in capital to keep it afloat.
The investors are also willing to add a further £5 million to fund the company as the FSP process progresses over the coming months. Securing this financing would keep the company afloat long enough to find a buyer.
Still, investors seem to disagree with my positive assessment, as evidenced by today’s selloff in Sensyne shares, which could plunge the company into more financial troubles as its valuation shrinks. Still, all is not lost for Sensyne.
*This is not investment advice. Always do your due diligence before making investment decisions.
Sensyne health share price.
Sensyne Health shares crashed 65.2% to trade at 26.25p, falling from Thursday’s closing price of 75.5p.
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Simon has over six years of professional trading experience across FX, commodities and equities. He has a strong passion for financial markets and is particularly focused on price action trading