In last week’s Week In Small Caps I suggested that we may have reached “Peak Doom”. Therefore it was rather pleasant that Thursday saw a 1,200 rise on the Dow, one of the biggest in recent times. The hope, as always, is that some of this momentum will pass through to UK stocks. In a way it has as far as the small caps here are concerned, as when going through the charts to compile the Bulletin Board Heroes, one sees more and more situations where there has been a rally to turn around a 6 months or even 1 year decline. The problem is that share prices in this space do not necessarily need big volumes to move, many of the rises can just be because market makers are caught short, so we see exaggerated rises.

Bank of England

Nevertheless, with the Bank of England suggesting the worst recession for 100 years, the peak doom scenario does seem to be the one to run with, especially since with nearly 50 years of reading such predictions, I have rarely come across any prediction that has been correct. Even those who get them right big time, say Nouriel Roubini “Dr Doom” get lucky once, and dine out on this call for the rest of their time. We may be heading for tough times, but there is almost always a twist – be it good or bad.

IPOs

Getting back to the small caps though, the toughest part may not necessarily be the share prices, but the liquidity in the market. After all, for many, buying such everyday items as bread, milk and eggs, can sometimes seem more important than buying stocks. The acid test from now, apart from hoping for an end of year rally, is that the IPO market returns to form. Until this happens it is going to be tough for there to be genuine enthusiasm in the City, and of course, it will not be a party for brokers either.

Pineapple Power

One of the big risers of the week, Pineapple Power (PNPL), and perhaps one of the mysteries here is why the stock has not been flying for some months now? This is for much of 2022 we have been in a cash crunch on the London market. Therefore, it would be logical to assume that cash shells should be amongst the most sought after and valuable vehicles on the market. After all, if you can no longer raise cash for an IPO, the obvious place to look to do a deal would be to knock on the door of a cash shell like Pineapple, or hope that the cash shell knocks on your door. It may be the case that some in the market are waking up to this concept. Indeed, it could be that other SPACs, there are not that many around, may feel the benefit of this realisation.

Clean Energy

One of the plus points of Pineapple is that it is a cash shell in the clean energy space, an area we were reminded of in the wake of COP27. What was noticeable is that the event did cause something of a bounce in companies within this sector, with ITM Power (ITM), Ceres (CWR), and Hydrogen Utopia (HUI) all benefitting.  Powerhouse Energy (PHE) received decent validation from Manchester University at the end of the week, something that made it one of the most followed stocks on Vox Markets. We shall presumably be able to see whether there is further momentum from COP27, via the share prices of these stocks and others related to saving the planet.

Lithium

Speaking of saving the planet, one of the few areas of the stock market where investors have decided that buying shares is more important than groceries continues to be the lithium space. Shares of Alkemy (ALK) remained near their recent peaks, as did Firering (FRG). Bradda (BHL) was supported by news it has received approval to list on the TSX-V Exchange. Marula (MARU) remains well underpinned by last month’s $5 million pre-payment facility advanced for the purchase of high-grade lithium project in South Africa.

IWG  / Hammerson 

In the good old days of the stock market, we used to have regular IPOs, and on occasion, bid speculation. This week there was a bid for the digital arm of IWG (IWG) - most famouis for Regus, from CVC. Given that some in the market value IWG north of 320p, the end of week close for the stock at 172p could be regarded as somewhat mean. At the same time, it could be worth attempting to guess what other entities could be in the sights of private equity. One company, which at least fits the bill in terms of size and the recent charting set up is Hammerson (HMSO). Very often before bid news the target company sees its shares fall to new near term lows (4-6 weeks), and then there is a gap higher on a bear trap effect. There may be no M&A in sight at Hammerson, but even if this is the case, the bargain hunters may start looking in its direction. 

Harland & Woolf

Finally, one of the good news stories of the week came from Harland & Wolff (HARL). Here the offshore construction company is looking to refinance its credit lines, with a proposed facility  of £70m potentially going up to £100m.