Another hopeful is attempting to turn carbon-based 'super' material graphene into cash as Directa Plus (DCTA:AIM) joined the junior market on Friday. Given the patchy performance of others listed companies trying that same trick it is somewhat surprising that the Italian company has managed to raise £12.8 million from investors, priced at 75p per share. Even more eye-popping is the fact that early demand for the stock sparked an incredible 43% jump in the share price to 105.5p, valuing the business at more than £47.5 million, or a staggering 33.6-times enterprise value (EV) to revenue.
Directa claims to have developed a proprietary scalable manufacturing process to produce and supply high-quality engineered graphene materials, which it plans to licence to third parties. Apparently, its plasma super expansion technology uses natural graphite and top-down production processes capable of creating ready-made materials. Current uses include lower-friction, higher grip bike tyres, super resistant ski jackets and, mind bogglingly, a huge super sponge aimed at sucking up oil spills (see picture below).
Needless to say, the company's financials are on the weak side. True, revenue has jumped from barely nothing two year ago (€65,147 in 2013) to €1.39 million in 2015, but at quite a cost. Directa ran up losses of €4.37 million in that same year as the company ploughed resources into new products and extensive research and development (R&D). It chewed through €1.35 million of net cash in 2015.
The big question facing investors is can the company grow revenues fast enough to support continued investment in R&D and secure the backing of the right kind of commercial partners while managing its costs effectively.
The company, reasonably, points out that graphene is a research hotpot and technological advances could catapult its use into all sorts of industrial applications. But finding a profitable niche has so far proved elusive for most that have tried. Specialists in the arena, such Haydale (HAYD:AIM), Versarien (VRS:AIM) and Applied Graphene Materials (AGM:AIM) have all been trying to square that circle for a while now, and none of them has yet managed to turn a profit.