Date: Mar 15, 2019
The last three months have been tough on First Vanadium Corp. (CVE:FVAN) shareholders, who have seen the share price decline a rather worrying 31%. But that doesn’t change the fact that the returns over the last three years have been spectacular. Over that time, we’ve been excited to watch the share price climb an impressive 3000%. So you might argue that the recent reduction in the share price is unremarkable in light of the longer term performance. The thing to consider is whether there is still too much elation around the company’s prospects.
We love happy stories like this one. The company should be really proud of that performance!
First Vanadium didn’t have any revenue in the last year, so it’s fair to say it doesn’t yet have a proven product (or at least not one people are paying for). So it seems shareholders are too busy dreaming about the progress to come than dwelling on the current (lack of) revenue. It seems likely some shareholders believe that First Vanadium will find or develop a valuable new mine before too long.
As a general rule, if a company doesn’t have much revenue, and it loses money, then it is a high risk investment. The is usually a significant chance that they will need more money for business development, putting them at the mercy of capital markets. So the share price itself impacts the value of the shares (as it determines the cost of capital). While some such companies do very well over the long term, others become hyped up by promoters before eventually falling back down to earth, and going bankrupt (or being recapitalized). First Vanadium has already given some investors a taste of the sweet gains that high risk investing can generate, if your timing is right.
