Hi All – as markets close, I wanted to get some thoughts out to the ALPP community who is, rightfully, a bit worked up about how the share price has performed the last few weeks, but especially the last few days.
As some context, the share price is now down (approximately):
- 83% from its high of over 9.
- 60% since October
- 36% in the last month
- 20% in the last week
So, what’s the deal? Why is stock tanking?
If I could answer that with absolute certainty…let’s just say I wouldn’t be releasing my info for free here! But I do have some thoughts as an outside onlooker without a position at this point.
Share Price Decline Factors
Q1 2021 Hype
I’ve said this before and I’ve said it again, buying in at 7 dollars per share was probably not the wisest choice in the world. But that’s a byproduct of the whole craze back in Q1 2021. Every penny stock and micro cap seemed to be pumped as part of the retail hype. If you bought in at the top, take it as a learning experience and reassess whether or not you believe in ALPP long term. More on that later…
If we assume that every share was AT LEAST 50% overvalued from its peak in January-March, that explains a lot of the share price since then. The markets have calmed down, the retail craze has largely died down (but not completely). But its safe to say the retail crazy has stopped affecting ALPP in a positive way.
So, we’ve explained, let’s say 50% of the drop from about 9.00 to about 1.60 per share. What else?
Acquisition Hype/Fold-in Time
I think a lot of investors have let the fact that acquisitions were happening cloud their judgement about a realistic share price. In the pennies, a lot of people seem to think that acquisitions = permanent share price gain.
In my opinion, unless you’ve hit the bargain of the century, or its blue-chip companies acquiring other blue-chip companies, it doesn’t really work like that in the OTC. What do I mean by that?
In the pennies, acquisitions, especially like those ALPP makes, are of relatively unknown companies where we don’t have a ton of publicly available information on them. In some cases, there is next to nothing public, which leads to a certain silly short and distort by a company that has an animal name 😊.
Regardless, investors still get really hyped up by acquisitions because they think it’s news, it’s exciting, it’s a new thing, and it’s going to change the company (hopefully) for the better. But once the hype wears off and the market has more time to assess, people start to rethink their feelings on the past acquisition and hype wears off.
It’s doubly hard when it is very hard to judge the acquisition’s impact on the company due to what I call fold-in time. By the time an acquisition is announced until the time we actually get to see financial performance of said acquisition, three to six months could have gone by, maybe more. Also, acquisitions tend to under-perform in their first 12-24 months after acquisition due to integration inefficiencies. So not only is that hyped up acquisition not looking as good as we thought, but we also had to wait six months to see it!
General Market Trends
I’m not macroeconomic expert, but I’ll take a stab at this. The smaller the company, generally market uncertainty hits you much harder over the short to medium term. But long term, generally smaller companies outperform larger companies in terms of share price gains.
ALPP is firmly a micro cap stock, and I think the market has been extra bumpy for micro caps like ALPP. With COVID, inflation, congressional deadlock, people tend to “flee to safety”. ALPP is not safety. Also, many people have also surmised that ALPP’s manufacturing segment has been hit hard by COVID and inflation, which makes perfect sense.
Call me a perma-bull, but I don’t think these types of things aren’t going to last forever.
I think this explains a good chunk of the volatility and dip lately.
I’ll keep this one short because I wrote a whole article on it. But people are seriously misunderstanding ALPPs MINIMAL dilution over the last 12 months, especially the last round that was used to fund RCA and ElecJet. Read my article on capital raising for more, but I thought the dilution from ALPP was very fair.
Nevertheless, people in the pennies see dilution and tend to run to the hills. So that has definitely been a factor.
My Take – Is There Hope?
There is absolutely, 100%, hope for the company. And you longs should not be deterred from this recent share price decline if you really believe in the company. If anything, this should be an exciting time to increase your position!
Why is that?
First, ALPP did a great job raising capital and reinvesting during their share price hype many months ago. They bought what I think are great companies and have a clear vision for how they want to the company to grow and improve. This should bring a level of stability to the company, and I don’t think we’ll see the company drop down into crazy low amounts because it has a strong backstop of net assets.
Second, I’ve said it before, but I think the market is really just reacting to the fact that we haven’t had an ALPP regulatory filing in a while. I think investors are getting antsy because we’ve heard about a lot of these cool acquisitions like ElecJet (by the way, anyone know if ElecJet is having a sale right now? 😊 I couldn’t resist) and RCA but haven’t seen it reflected in a financial statement. We also have heard about Alt Labs having a slow start, Vayu/IA are still in development, manufacturing has been hit hard, the list goes on…
Third, the dilution was wildly overblown. I won’t get into it again, but it was good dilution in my opinion which people just naturally hated because they hate all dilution. I’ve said my piece…
Impatient Investors and Perspective
In my opinion, people are just getting impatient with a company that’s doing exactly what it said it would do. They’re acquiring quality companies, improving them, and growing. Nothing has changed in the company (in that there’s no news) in the last week, yet the share price is down 25%!
Think of how excited you were about ALPP 6 months ago. Has anything earth shattering-ly bad happened to ALPP since then? No. Did Alt Labs burn down? No. Did drones get banned? No. Did Kent quit to join the Peace Corp? No. It’s still the same company doing its thing, but 50% cheaper than when many of you bought in.
I am very close to entering a long position because of all of this…which is sort of counterintuitive if I was a nefarious person…shouldn’t I be bashing the company before buying in?! (Joking obviously).
All kidding aside… what I see are just a bunch of impatient investors who want NEWS NEWS NEWS all of the time, which is quite common in pennies, but that’s not how this works. I think people are jumping ship on a long-term buy to chase news or the next “cool” thing. In the meantime, ALPP can keep plugging along doing its thing now that is has laid the groundwork with a fine bunch of portfolio companies.
If you believe in management, then this is not something to worry about for the long term; this is actually an excellent opportunity to buy more. Period. If you messed up and bought during the hype, take it as a learning opportunity. However, that doesn’t mean it’s a bad company now or that you can no longer invest in ALPP. Heck, that 7-dollar share price you bought in at might be a huge gain in 5-10 years. Just keep plugging along with your DD, cut out the noise and the bumpy road of the pennies, and really decide if you believe in ALPP. If you do, what better time to buy than now! So, everyone just calm down, think about the company’s long-term vision and growth prospects, and decide if you still believe in the company.
Remember, trading in the micro caps is a bumpy road. Stick to your guns, enjoy the ride, and focus on determining your next buy price.
Thanks for listening to my rambles! If you’d like to support me on Patreon, I’ve provided a link here: https://www.patreon.com/SamAkerFinance
DISCLAIMER – AT THE TIME OF WRITING THIS ARTICLE I DO NOT HAVE A FINANCIAL INTEREST, LONG OR SHORT, IN $ALPP. THIS ARTICLE IS NOT FINANCIAL ADVICE AND IS INTENDED ONLY FOR EDUCATIONAL PURPOSES. I AM NOT A FINANCIAL ADVISOR. AT THE TIME OF WRITING THIS ARTICLE, PERSONS AFFILIATED WITH THE COMPANY ANALYZED ABOVE MAY BE PROVIDING MONETARY COMPENSATION AS MONTHLY PATRONS THROUGH MY PATREON. THIS COMPENSATION IS NOT PROVIDED IN RETURN FOR ANY SERVICE, WRITING ABOUT A PARTICULAR TOPIC, AND/OR FAVORABLE OR UNFAVORABLE OPINIONS. MY PATREON SUPPORTERS HAVE NO INFLUENCE ON THE CONTENT OF MY ARTICLES.