The share price of Coro Energy (LSE:CORO) appears to have found bottom at around 3p and has since marched back upward, currently consolidating at around 3.6p. Since raising over £14m in January, which included £6m from cornerstone investor CIP Merchant Capital, Coro has been busy pulling its team together and gearing its focus towards South East Asia. The fundraise was priced at 4.38p with one warrant issued for every subscription of two shares issued – these being exercisable at 6.57p. The company’s marketing activities with prospective investors have been in full swing, so what’s holding back the stock?
Well, it’s simply the number of shares issued at lower prices. The company was born from Saffron Energy (LSE:SRON) after it absorbed the Italian assets of Sound Energy Holdings Italy Limited. This resulted in the issue of 185.9m shares to Sound Energy shareholders – that’s around 25% of shares in issue.
The stock is a difficult one to value, with so many factors in play, many of which are unknown at present as we don’t have the details of deals potentially in play. So current buyers are taking a bit of a leap of faith that the team assembled will deliver the goods. But there is the safety net provided by the company having a decent cash balance to keep the show on the road in the meantime. There is also the fact that investors in the last fundraise paid considerably more than the current price. It’s by no means a failsafe gauge, but I would be very surprised if the share doesn’t make a move towards that price in the near future as the selling overhang diminishes.
Glance at the chart and you’ll notice the price action sits in two well-defined downward channels (purple & orange). The top lines of these channels provide possible near-term target prices, currently circa 4.75 and 4.3 respectively. But as I say, the placing price of 4.38p is an obvious focal point and potential first target. In closer proximity, there’s a natural line of resistance at 4p and a fuzzier one somewhere around 3.83p.
The stock also appears to be using the 20 Day Moving Average (DMA) like a trampoline since it jumped above it last week, which could imply a move up from here. I also take comfort from the Relative Strength Index (RSI) which is moving in the right direction with higher highs and higher lows – and its sitting just below that all important 60-70 bullish zone.
As far as AIM punts go, Coro appears to offer a decent chance of upside from these levels all things considered. With a very experienced and active team at the helm, I would be surprised if retail interest in the company didn’t continue to grow.
Author: Stuart Langelaan
Disclosure: The Author owns shares in the company mentioned above