Your mate Richardson in the AFR still doesn't mind having a...

Your mate Richardson in the AFR still doesn't mind having a little go where he can..

Meme-stock fever spreads to more companies on ASX

Tom Richardson

Markets reporter and commentator

Aug 16, 2021 – 3.21pm

The meme-stock fever gripping US sharemarkets has reached the ASX as retail traders swarm towards popular companies on social media, message boards and budget trading apps.

The young investors who are part of this new wave prefer to conduct research on Reddit, Facebook, TikTok and Twitter, and speculate on stocks they expect to rise, without any reference to fundamentals.

The result is befuddled valuations across the market where online forums and social trading determine valuations far more than estimates of future cash flows.

The meme-stock asset class’ new frontrunner is South Australian minerals explorer turned deep-tech quantum computing hopeful Archer Materials. It climbed 21 per cent on Monday to a record $2.88 on a valuation of $655 million.

Under its chairman and significant shareholder Greg English, Archer has sold its mineral tenements to focus on developing a quantum computer chip capable of working in mobile devices at room temperature, but for now, has no product, with the potential technology in development.

Over the 12 months to June 30, Archer posted an operating cash loss of $2.3 million on zero sales. Staff costs for the year totalled $1.78 million with administration costs of $750,000.

The chairman’s salary from July 1, 2020, of $370,000 accounted for about 14 per cent of the company’s total annual cash expenses. The chairman and chief executive’s salary of $251,850 combined equalled 24 per cent of total expenditure over the year.

In other words, the tech company boasting a $655 million market value has only a handful of staff, no product, and spent just $2.6 million in operating expenses last year.

Frenetic rally

Its shares are up more than five-fold from 51¢ in August 2020 and up 26-fold from 11¢ in August 2019. The frenetic rally follows a string of positive announcements around the quantum computing chip’s development – there have been three announcements since August 10 reporting that the technology has been granted patents in South Korea, China, and the US.

One of just three directors, Alice McCleary resigned on July 29 and was listed on June 17 as owning 3.87 million shares after acquiring an additional 1.17 million via options.

A request for comment from Ms McCleary or Mr English received no response from the company. Nor was there any reply to queries on the number of full-time staff Archer currently had working for it.

It has just two board members in Mr English and Kenneth Williams, who joined less than a year ago.

The group’s crazy $655 million valuation may be a standout, but it’s not unique as meme-stock valuations mushroom across the sharemarket thanks to their popularity on meme-infused message forums such as Hotcopper.

Dimerix’s outrageous gains

Others gripped by the meme-stock fever include Brainchip, another computer chip business, which is valued at $840 million, despite having no commercial product or sales. Meanwhile, Paul Hopper’s biotech hopeful Imugene is worth $1.6 billion, despite not having a product candidate at the phase III clinical trial stage.

Other businesses have built huge followings among retail investors trying to get rich in a hurry. On Monday, penny stock biotech Dimerix opened 70 per cent higher at 40¢ after being recommended by online stock tipping website Next Investors.

Just last week, Dimerix issued $20 million worth of new shares to institutional investors at 20¢ each to leave them sitting on an instant $20 million paper profit today.

StocksDigital, the financial media business behind Next Investors and Wise Owl, freely admits to investing in businesses before making public recommendations.

Biotech company Dimerix is raising $20 million.

The group made a $7.8 million paper profit in a few weeks after acquiring share options in penny stock Oneview in exchange for promoting it on its websites.

Given the outrageous profits on offer, the growing emergence of meme stocks as an investment class can be admonished, but not ignored.