The local share market has found some form in March after a horror start to the year. Unfortunately, the same cannot be said for shares of the speculative 1-Page Ltd (ASX: 1PG) business, which have crashed almost 40% so far this month.
From $2.55 at the end of February, the shares have since retreated to just $1.54. They've also fallen more than 56% since the beginning of the year and are down nearly 73% since peaking in September…
What's happened?
Based in Silicon Valley, 1-Page is a business that provides cloud-based human resources from a software-as-a-service (SaaS) platform. It debuted on the ASX in late 2014 via a so-called "backdoor listing", which occurs when a company (often a struggling mining business) acquires another business (often in the technology sector), and then changes its primary business focus accordingly.
According to Yahoo, there have been more than 123 backdoor listings on the ASX since 2013 with almost half of them occurring last year.
While this trend could give Australian investors the opportunity to invest in up-and-coming technology companies, there is also a high level of risk in doing so – and 1-Page isn't immune.
I personally believe that 1-Page offers an attractive product that could play a significant role in the human resources field in the future. However, I am also aware that this is a company still in its infancy – it has very low revenues while its operating cash flows are negative as it focuses on research, development and marketing.
It recently said it would increase its cash burn from about US$1.3 million a month to US$2 million a month, which may have gotten some investors offside.
It raised about $50 million in a capital raising last year which should support its operations for a while, but based on its sheer value (even at $1.54 a share it boasts a market value of around $237 million), it's getting to the point where investors need to start seeing some more solid results from the business.
Speaking of which, another reason why 1-Page's shares might be falling so heavily could relate to the recent correction in the share prices of US technology companies, including LinkedIn, which is a business-oriented social networking service and a rival of 1-Page. Share prices have rebounded since then, but some investors still remain uneasy.
What happens now?
1-Page is a highly speculative business and carries plenty of risks. That's why I haven't increased my stake in the business, despite the heavy falls endured by its shares recently, and I will likely refrain from buying anymore unless they fall to a price that I deem too good to pass up.
Still, if everything can go according to plan, 1-Page could be a considerably larger business in the future than it is today. Investors willing to take a risk should certainly keep their eye on the business, while those investors who have a lower temperament for risk could also look at SEEK Limited (ASX: SEK) instead.
