Not another strategic review…

Food on the Move: FFF’s weekly roundup of listed FoodTech’s movers & shakers

A week of two halves for the Nasdaq.  Had the week ended on Wednesday 25 April 2023, the tech-heavy index would have been nursing a loss of -2.2%.  Just as well it didn’t then. One strong, two-day rally later and the Nasdaq finished the week ended Friday 28 April 2023 up 1.3%.  Hurrah!  Only problem is FFF’s listed FoodTech space didn’t appear to get the memo. The result? For the second consecutive week, share price fallers comfortably outnumbered risers: 26 fallers; 17 risers; and five non-movers.  Boo!

Among the 26 fallers, Desert Control stands out with a 35% loss after the AgTech released its full-year results.  The numbers could, at best, be described as something of a mixed bag: total cash balances as at 31.12.2022 (incl. other current financial assets) more than halved to NOK 78.2M from NOK 179.3M previously; revenue was up to NOK 4.2M from NOK 3.1M the previous year; EBITDA loss widened to NOK -90.2M from NOK -31.7M; as did the loss for the year, NOK -90.5M compared to NOK -31.7M the year before.  Enough to warrant a 35% share price fall? Perhaps, but the third last paragraph of the CEO’s message may have contributed too, specifically two words:

“Desert Control enters 2023 with several commercial inflection points on the horizon. The company operates in a global market with significant tailwinds from government initiatives and strong macro-drivers accelerating demand in multiple regions. To strengthen the company’s strategic ability to develop multiple market opportunities and secure funding to pursue growth strategies, the company has initiated a strategic review in the new year. With the support of its financial advisors, the company aims to explore a broad range of strategic alternatives, including financing, structural and business development opportunities.”

Spot the two offending words? Not “securing funding”, although they come a close second.  No, the offending words are “strategic review”.  For FFF’s listed FoodTech space has been here before. It was not that long ago when Food on the Move’s “New year, new beginnings?” covered the news that online grocer Boxed had launched a strategic review “…to explore strategic alternatives, including, among other alternatives, a possible sale of the Company.”  True, Boxed shares rose sharply on the news – mention of ‘a possible sale’ can stir the market’s animal spirits – but just three months later and Boxed had thrown in the towel and filed for Chapter 11 bankruptcy protection.

And round about the same time vertical farmer Kalera announced “its wholly-owned and main operating subsidiary, Kalera, Inc. (Kalera) has filed a voluntary petition (the Chapter 11 Case) in the United States Bankruptcy Court for the Southern District of Texas (the Bankruptcy Court) seeking relief under Chapter 11 (Chapter 11) of Title 11 of the United States Code (the Bankruptcy Code). Kalera will continue to operate its business as debtor-in-possession under the jurisdiction of the Bankruptcy Court.” Chief Restructuring Officer Mark Shapiro said: “The Chapter 11 process will allow Kalera to continue operations and serve its existing customer base while it evaluates strategic alternatives for its business and assets.”   For “strategic alternatives” read “strategic review”.  Now trading on the OTC market, KAL shares shed a further 25% this week.  Tough place the OTC market. Here’s hoping Desert Control’s strategic review has a more positive outcome than Boxed and Kalera’s…

Finally, shares in Olo and Farmers Edge shed 12% and 10% respectively.   Why mention the two AgTechs in the same breath?  Because they both put out announcements detailing the upcoming release dates for their respective Q1 financial results.  Hmm…is something at play here – results flagged, shares sell off? Rest assured, Food on the Move intends to keep an eye on how share prices react to future, seemingly innocuous, release date announcements to see if a correlation exists between the two.  The share price moves of both Olo and Farmers Edge suggest there may well be – investors heading for the exits in case of bad news? Not another strategic review…