Someone asked why short VHT ?

Shorting is really really hard especially in a small cap and anyone who says otherwise has never tried. That said you asked why would someone consider shorting Volpara.

Well it is pretty simple, it can be argued that there is a mismatch between the valuation and the likely growth that can be achieved going forward. You will have seen in a previous post an attempt to calculate the organic revenue growth over the last 3 years and we came up with a figure of @ NZD 5 million (all the rest has been acquired).

So at 1.07 per share and using Morgans forecasts (which they keep cutting) which are the most optimistic we will see growth in revenues from NZD 25.35 million this financial year (ending 3/2022) to NZD 48.9 million in FY ending 3/2024. So they expect revenue to grow by NZD 23.55 million in the next 2 years, this compares to organic growth of NZD 5 million over the last 3 years.So lets assume the Scott Power is correct and they hit that revenue target .... what would be the stocks P/E for FY3/2024 ? it would be 74.4 x earnings, not exactly cheap.

So if they can more than double their revenue in the the next 2 years, which history suggests is most likely be achieved via an acquisition you will own a stock on 74x FY 2024 earnings.

So why short the stock .... I can see two reasons why a risk tolerant investor might consider doing so. Firstly the expected growth embedded in the current share price is significant and history would suggest it will not be easy to achieve. Secondly, if they are to achieve it, they will most likely need an acquisition, that will require more cash and probably a placement.

There are lots of reasons not to short but to it is easy to see why some people may be inclined. My own view is that you will see a placing in the next couple of months to fund an acquisition. I see that after I previously highlighted Ralphs liking of a fund raising post by Bell Potter on Linkedin he has now made that section private ... not sure what that says !