From sky-diver to rocket stock in a week, few stocks yo-yo quite as wildly as those of technology tiddler Arcontech (ARC:AIM). Today's announcement of a major new customer win has sparked the biggest share price jump on the whole market on Thursday, the shares soaring more than 67% to 0.24p. The stock was up over 80% at one stage earlier today.
The deal will mean selling a minimum of 200 licenses for its real-time Excel add-in, Excelerator, Arcontech winning the contract after the client apparently held a beauty parade among similar products. Detail is light but City insiders reckon the customer is an international investment bank, which 'broadens the existing customer base and provides a new channel to grow the business,' according to analysts at FinnCap.
This positive news comes a week after the market data software systems designer swung to a first-half pre-tax profit, turning a £66,735 loss into a £116,932 gain. Yet that news was rightly overlooked last week thanks to accompanying confirmation that another of its few big customers wanted to ditch Arcontech's software almost two years early. That plunged the share price into a 32% fall on the day, to 1.05p.
Which neatly illustrates the hefty risk of owning such a small and illiquid stock, where a single contract win, or loss, can make or break the company. Yet investors will rightly wonder whether this risk is worth baring for the potential rewards. Historic evidence suggests firmly, no. In five years the company has, give or take, doubled revenues, albeit to a paltry level just shy of £2 million, on which it has stubbornly refused to make any real money. The company has remained in the red at an operating level in each of those five years.
Perhaps this is changing, there's reasonable cash generation from such a piddling business, a fraction more than £340,000 in the first half of this year from operation, although much of that is upfront paid subscriptions, or deferred income to give its official term. Cash in the bank of more than £1 million also represents about a third of the modest market cap. But it is hard to ignore the feeling that Arcontech is, and will remain, an insignificant entity that really has no place on the stock market, AIM or otherwise.