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Helium One Global (LSE:HE1) is a penny stock that, during the first 21 days of March, issued seven stock exchange notices. To paraphrase Jane Austen, it’s a truth universally acknowledged that a company in possession of a struggling share price must be in want of a good news story.
Since listing in December 2020, Helium One’s share price has fallen 76%. Largely due to a need to raise cash, more and more shares have been issued. Just after it made its stock market debut, there were 497m in circulation. Now, over 5.9bn have been issued.
In August 2021, the share price peaked at 28p. Today (21 March), the stock changes hands for a tiny bit over 1p.
Fortunately, for long-suffering shareholders, the recent flurry of press releases have all been positive.
The company has a 50% interest in a helium project in Colorado, US. And over the past few weeks, development drilling has been underway to establish how much helium is under the ground. Formal test results are awaited but the early signs are encouraging.
In other news…
Shareholders will also be hoping for good news about its other — so-called “flagship” — project in Tanzania.
On 3 March, the group announced that it had received an offer of a mining licence from the government. It didn’t go into details about the proposed terms but I suspect there’s a negotiation underway about how to share the proceeds when the mine becomes fully operational.
The press release said “the offer letter and terms are now under detailed review by the Company and further announcements will be made in due course”.
The company hopes to be generating revenue from its American project in the first half of the year. Income from Tanzania is then expected before the end of 2025. This optimism has helped push the share price 12% higher since 1 January.
And assuming both projects are fully commercialised, it shouldn’t have too much difficulty selling the gas. There’s a growing market for helium. And it’s worth over 100 times more than natural gas.
But…
However, there’s one major hurdle that needs to be overcome before the investment case becomes clearer. Namely, the group’s going to have to raise more money.
Shareholders will be keeping their fingers crossed that the directors are able to secure some sort of bank (or other debt) finance. Alternatively, the company might be able to find an industry partner with deep pockets. But in either scenario, I suspect further shares will also have to be issued.
And if I’m right, there can only be two outcomes for shareholders. To avoid dilution, they will have to buy additional shares and part with more of their hard-earned cash. Otherwise, they will own a smaller proportion of the company than previously. Neither of these options is palatable to me.
Therefore, until the situation becomes clearer, I will not contemplate taking a stake.
