Versarien’s Neill Ricketts discusses recent share price decline and progress plans
Despite a flurry of news over recent months, shares in smart materials player Versarien have fallen from 134.5p to 76.5p so far this year, a drop of around 43pc. Here, chief executive, Neill Ricketts tells us what he thinks is driving this decline and discusses his plans for the coming months.
Versarien has plastic, thermal, and hard wear divisions, but its primary focus at present is mostly on graphene at present. Graphene is a type of carbon made up of sheets just one atom thick and has previously been called the most durable material ever tested. It has been introduced in display screens, electric/photonics circuits, solar cells, and various medical, chemical and industrial processes.
Some think the uptake of graphene will accelerate considerably over the coming years. For example, a report from Statistics Market Research Consulting says the global graphene market will grow by 40pc pa between 2017 and 2026. Meanwhile, another analyst expects it to be worth $311.2m by 2020.
As the industry reaches this tipping point, Versarien has been delivering newsflow in numerous areas. For example, it established various industry partnerships last year, including one with the University of Cambridge and another with the University of Manchester. Meanwhile, it has also become a member of the Graphene Engineering Innovation Centre, the National Graphene Institute, and the Graphene Council.
Elsewhere, the firm has been growing its presence in the construction and materials areas, securing a deal with South Korea’s AXIA Materials to develop graphene-enhanced composite materials and smart graphene devices. These will use Versarien’s Nanene graphene nanoplatelets and graphene inks. It also agreed to work on a US-based project involving the incorporation of Nanene into large-scale polymer structures used in civil infrastructure projects
As well as establishing collaboration agreements, Versarien has been making acquisitions in areas where it believes graphene can add value to existing technology. Most recently, it acquired a Spanish business called Gnanomat for £2.6m, funded in part by a placing at 145p a share.
Progress in China
Since we last covered Versarien in October, the business has made notable steps forward in its efforts to expand into China. In particular, it has been working alongside JHFI to establish a manufacturing centre in the Jinan Innovation Zone, within China’s Shandong province. It hopes to form a joint venture for the manufacture and sale of its Nanene, Graphinks and other related graphene products in the region.
Versarien’s efforts here have seen it sign an MoU with Tunghsu Optoelectronic Technology, one of the world’s leading suppliers of optoelectronic display materials. The pair plan to jointly develop graphene-related projects in China and set up a graphene industry fund and an institute to promote the country’s graphene industry.
Elsewhere, Versarien has signed similar agreements with China Railway and an un-named, state-owned aerospace company engaged in the research, design, manufacture and operation of various aerospace systems. At the start of February, Versarien said it was negotiating more specific terms with its multiple Chinese partners and had also signed an additional MOU with another of China’s Fortune 500 building materials organisations.
Finally, earlier this week, the firm announced that Yi Luo was joining its team on secondment from the UK Government’s Department for Business, Energy & Industrial Strategy. Luo will be focussed on progressing the Company’s international expansion, particularly in China, working alongside Matt Walker who has been on secondment to Versarien from the DIT since May 2018.
Ricketts told us he has been ‘delighted’ with the progress made by Versarien over the past year, adding that negotiations with the firm’s Chinese partners are now at their final stages:
‘We are ahead of where I thought we would be. That is really comforting, and I can judge and be comforted by the progress we have made. In China, we are now seeing the crossing of the Ts and dotting of the I’s so everything within the company is progressing well. The collaborations, the deals, are going in the right direction in all of the countries in which we are based. ’
Share price hit
Unlike many of its peers on the junior market, Versarien was broadly able to partially hold its own in Q4 last year throughout the equity bear market. Indeed, despite global growth concerns and US/China trade war fears, the stock was able to stay in the 105-133p channel after falling from highs of 186p.
However, the same cannot be said for the stock in recent weeks. Regardless of its strong news flow and Ricketts’s optimism, regularly communicated to investors through social media, the company fell from 131p to 76.5p in February alone. So, why is this?
Ricketts says he believes the decline is a result of generally weak market and sector conditions rather than anything specifically company related. He said many similar firms to Versarien are experiencing a similar decline:
‘A lot of companies are having a lot of trauma,’ he said. Throughout Q4 last year, I think the City was getting ready for any difficulties around Brexit and quite a lot of funds were selling down to release cash to either prepare for redemption or any bargains that the might arise. The problem with that is you a double whammy. The institutions are selling down because of the macroeconomy; then the private investors start getting nervous and unwinding their investments as well, which means that it goes on a roll. We have seen this across many shares, not just ours.’
‘We didn’t get hit by this in Q4 so much, but we have definitely felt pain in January and February this year. So we are a little behind others in our sector, but it is pretty universal across many stocks like ours.’
Despite the current day-to-day share price weakness, Ricketts says Versarien can support continue working towards its long-term goals for the time being thanks to its healthy cash balance. As mentioned, the firm raised £5.2m last September at 145p a share.
‘The good thing for us is that we have a lot of cash,’ he said. ‘We did a placing at about the right time, which means the business is well funded. We can put our tin hats on, so to speak, and just carry on working diligently while the share price moves around us. We don’t need to go into the city to raise any money at this time, and if we were doing that we would get severely punished because its a relatively weak market.’
Finally, he says the business is looking to create value in many areas over the short-to-medium term as it continues to pursue its long-term goals:
‘In general, with these sort of stocks, if they have previously been valued at these highs then it is much easier to do it the second time. So, for now, we are really focusing on continuing along the path we began five years ago. Over the next six months, we are looking at making significant progress with our international plans, and we are negotiating and going through the legal frameworks now.
’Meanwhile, in terms of collaborations, we are getting positive test results and working with our collaborators, who are keen to maintain their first mover advantage. We have had positive test results in graphene, and these are continuing, so the value proposition is developing. Graphene is just one of many smart materials, so we are very excited about what the future will hold.’