Yet again, a high risk concept stock backed by a a wealth of City institutions as well as a legion of retail investors has crashed and burned. After two years of trials, household products giant Procter & Gamble has decided not to use cost-saving technology made by Pursuit Dynamics. That's nothing short of a disaster for the Aim-listed company and its shares are unlikely to recover.
Some Aim investors will find Pursuit's demise depressingly familiar. Over the past few years stocks such as Antonov, Ceres Power and Silence Therapeutics have all been bid up on excitable tlka of their potential only to flatter to deceive. True, the returns can be astronomical; Asos investors could have bought shares for less than 5p eight years ago and its shares now trade at 1539p. But the risks of losing your shirt are significant.
Now, with Pursuit's shares down 85 per cent in a week, serious questions are being asked about its future. A strategic review is due to report before the end of June. Pursuit has spent a fortune developing technology meant to save users money by shortening production times, and P&G was forecast to be the deal that transformed its fortunes. Instead, management have been forced to tear up ambitious forecasts for revenue of at least £22m and a cash profit this year. True, a number of trials are ongoing and contracts with US ethanol plants do generate some revenue, but such a high-profile rejection does not bode well.
Questions should also be asked about Pursuit's corporate communications. Its shares fell by more than a quarter on Thursday 17 May and a short statement rushed out the next morning claimed management knew of no reason for the fall. That sits rather uneasily with subsequent events.
Those institutional shareholders who have bankrolled the company suffered alongside individuals. Several big funds, including M&G, Blackrock, Scottish Widows and Standard Life had to pick up the pieces after a heavily discounted rights issue flopped spectacularly earlier this year. They will be sitting on big losses and are likely to be asking tough questions.
