Editor’s note: This article was first published in July 2012. It is same-day market news from 4 July 2012, reporting a 62% rise in Biosearch and up to 30% in Natraceutical that morning. Biosearch has since been renamed Biosearch Life and was taken over by Kerry Group in 2021.
The two big surprises of the morning come from two companies on Spain’s continuous market. On one side, Biosearch (Puleva Biotech), up more than 62%, and on the other, Natraceutical, which has risen as much as 30% over the course of the morning.
In June we already warned that rises like these would happen in small-cap listed companies, and not because of a rumoured merger between the two companies, as some have speculated. That speculation came up as a way to explain why the shares might be rising. Neither company knows of any such merger, and Biosearch has said so to the CNMV (Spain’s securities regulator), arguing that it cannot explain the rise because it has no idea why its shares are going up.
We may well be looking at a clever speculative move, in which enough capital is injected to push the share price up in two or three stages, until the rest of the market thinks the stock is about to soar much further.
That initial capital then gets pulled out little by little, or it could come out all at once, or in several big chunks, as has happened throughout the morning.
Be careful about taking positions in either stock: once all the initial capital that was injected has left, the price will fall again, and those who bought at the top will be trapped. That said, purely speculative trades are possible, but only with well-placed stop losses, since these shares can rise or fall by very large percentages.
We will see this kind of move very often in other small-cap stocks.
Featured image: Joy Weinberg, CC BY 2.0, via Flickr.
