Catenae Innovation (LON:CTEA) sits at the confluence of two very different investment themes that have been driving stock prices recently – COVID-19 and the use of blockchain to power the growing demand for secure identification and verification of individuals.
Shares in Catenae Innovation saw a spike from GBX 0.5 in mid-April to GBX 7.10 before falling back to a more conservative trading range of between 3.40 and 1.8o. This small cap has done much, much better than this for investors in the past, as those who owned the stock in 2016 will recall. Still Catenae Innovation has a 52-week high at 9.9, so a return to further glory is not beyond the boundaries of possibility.
Much of the current investor excitement swirls around the company’s GDPR compliant identity document exchange system which will allow an individual’s coronavirus test status to be stored in their mobile phone. This addresses one of the issues being faced by governments as they roll out coronavirus testing regimes – how do you certify that someone has been ruled as having had the virus already, and how can that immunity be verified independently?
Mobile phone technology holds out that possibility. Catenae is working in conjunction with Newcastle Premier Health, the occupational health and wellness business, to develop a documentation exchange system that can record a test status. The company is expected to report back on progress with its proof of concept by the end of this week.
Catenae share placing and warrants
Earlier this week Catenae issued 37,500,000 ordinary shares in a 2p placing, working through Brandon Hill Capital, its broker. It confirmed that the proceeds of the placing would provide it with additional working capital ‘headroom’ to help it to progress its activities.
The higher share price of the company seems to be creating excitement in some quarters, with the additional exercise of a warrant over 15m ordniary shares on 10 June at an exercise price of 1.25. Catenae also issued 2,083,333 shares in ordinary stock at a price of 1.68 subject to a six month lock in.
The real excitement around Catenae involves its COVID-19 testing certification solution. Catenae does have other products that draw on the same technology. For example, its OnSite DLT product has been designed for real time management of a remote work force, including paperless inspection and reporting. It is used by businesses that require secure, real-time auditing and administration of field operatives and assets.
What we think
Catenae has some interesting products, leveraging blockchain technology, to achieve practical requirements. We like this in a technology company. There are some more niche products in there, like its sports management tool, but we are surprised the firm has not made more from its core product suite already.
A year ago Catenae was still involved in a cost reduction exercise as well as refocusing on its core product range, like OnSite and OnGuard. CEO Tony Sanders told investors that he was looking to expand the technology to business sectors outside of football, rugby and buildings and facilities management. At the time nobody had heard of COVID-19.
Moving into medtech is a smart play for Catenae and shows imagination. The next few days will prove critical as investors await proof of concept data from the company. While we would like to add it to our watch list, it still seems a little too risky to us until we see what the company can realistically come up with in its partnership with Newcastle Premier Health. If that pans out, then expect to see this stock start to motor again.
