Amid the boom of retail investors entering opportunistic penny stocks capitalising on COVID, many are now under the watchful eye of ASX regulators after share price pumps led by business pivots into hygiene product supply such as hand sanitiser.
Just one of many to do so at the start of the pandemic, food production company Holista Colltech (ASX: HCT) is one now deeply under scrutiny at a time when retail investors have fallen victim to herd mentality and volatile markets.
In November 2019, Holista Colltech was focused on low-GI pasta and bubble tea ingredients.
From 1 November 2019 to 31 January 2020, HCT shares had an average of 56,888 shares traded per day with an average close price of $0.077 through the period.
On 29 January 2020, the Company announced to the market that it had received large orders for hand sanitiser and from there, a series of ASX announcements were released relating to increased sanitiser production, increased orders and 99.99% effectiveness against various viruses and infections.
By then, HCT was all over social trading forums as retail investors flocked to COVID companies, with many penny stocks scrambling to release ASX announcements declaring their business interest in hygiene products.
From 1 February 2020 to 30 June 2020, HCT shares had an average of 7,865,629 shares traded per day with an average close price of $0.145 through the period. That represented an increase of 13,726.5% in daily liquidity relative to their pre-COVID activity as a food company.
As is common with companies that are being watched by the market regulator, Holista entered a trading halt prior to the release of all announcements from February onwards but with each announcement under intense scrutiny, many were followed up with corrections or retractions.
These included:
- On 25 February 2020, retracting an earlier statement that their sanitiser contained an “active ingredient that has proven to kill all previously tested corona-type viruses”
- On 25 February 2020, retracting an earlier statement that their sanitiser “kills the AIDS virus and the resilient Mycobacterium tuberculosis. In Malaysia, it is approved by the Ministry of Health as being effective against the H1N1 virus.”
- On 20 April 2020, responding to an ASX Aware letter querying to the timing of an announcement regarding development of nasal balm;
- On 21 April 2020, clarifying they would not be issuing 12 million new shares in regards to previously announced capital raising activities with funds being sought to accelerate the global rollout of their sanitiser;
- On 22 April 2020, retracting a Youtube video released by the Company which “contains misleading and incorrect statements with respect to the Wuhan Coronavirus”;
- On 13 July 2020, responding to an ASX Aware letter querying an announcement that referenced scaling back of previously declared $3.8 million sales targets.
With these regulatory flags, it should come as no surprise that all future announcements would be scrutinised, leading to the latest ASX aware letter by the market regulator seeking clarification on sales activities between Holista Colltech and iGalen, a business 47% owned by Holista CEO Dr Rajen Manika.
Alongside news released to the market for their hygiene business activities through the pandemic, Holista Colltech has reported a net operating loss of $2.6m loss for the six months ending 30 June 2020.
But by the time those figures were released, plenty of retail investors had been induced by the COVID storyline where shares were traded at an average of $0.145 through the pandemic, but are now hovering around $0.065 in a costly lesson for the herd.
Pasta investors may still be keen on the stock though, with Holista having won the 2019 USA Taste Championship awards for their low-GI spaghetti and linguine.
Alfred Chan is a Business Reporter at The Sentiment specialising in ASX-listed small cap companies, a bloodstock enthusiast and former equities analyst.
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