Q: On Oct. 1 Kracken announced a bought deal of $25 M at $1.6 after the market close, the stock closed at $1.78 Oct. 1. On the morning prior to open they announced an upsize of the deal by $20M, the stock closed up at $1.80 on Oct 2 with very large volume and has maintained that the last couple of days. When you see this type of event what thoughts do you get about it and the stock.
5i Research Answer:
The issue was upsized to $45M which is of course a sign of strong demand. The price action (new high) post-issue is also a positive sign. Market cap is now large enough to attract new investors, and any cutbacks in the deal may result in more future buying in the market by institutions. We like the outlook for PNG and it has displayed the ability to win some big name contracts. The company is also profitable with decent margins and small cash flows. More contract wins over the next few months will be a big positive. Anlayst estimates forecast revenue growth of 37% and 22% for 2024 and 2025. We would be comfortable owning this for a small cap growth-focused investor.