How a 'Coronavirus pivot' pushed Food Revolution's stock up 60%
The Lean Startup defines a pivot as 'a structured course correction designed to test a new fundamental hypothesis about the product, strategy, and engine of growth.'
Maybe one of the most legendary pivots in financial markets was Kodak’s decision to launch KodakCoin, a photographer-focused cryptocurrency.
The timing really couldn’t have been much better: It was early 2018, crypto-mania was still basically in full-swing and people seemed convinced that blockchain was going to change the world.
Ultimately, if cryptocurrencies were going to rewrite the global financial world-order, maybe investors became convinced that KodakCoin was going to restore Kodak to its former glory.
Those facts proved to be incidental anyway, investors bid the stock up 60% in just one day, and more than 200% in two weeks.
Then the music stopped: the crypto market crashed; Bitcoin survived, but many of the alt-coins that blew up during the crypto boom faded into obscurity. People don’t really talk about those alt-coins anymore and Kodak’s share price is down ~70% since January 2018.
Food Revolution share price: the ‘Coronavirus pivot’
The unfolding Coronavirus (COVID-19) situation has also opened up opportunities for companies to pivot. This time the focus isn’t on blockchain, but on hand sanitiser. (Though the share price impact is mostly the same.)
On 18 February, Food Revolution Group (ASX: FOD) – a penny stock previously concerned with producing ‘juices, fibres, infused fruits and fruits waters’ announced it would be venturing into the production of hand sanitiser.
Specifically, the company reported that 'it will commence production of hand sanitiser, which is in high demand due to the global Coronavirus outbreak.’ With it being further pointed out that the company ‘expects significant orders from its distribution partners imminently.'
The company had after all just finished upgrading its plant in December 2019.
‘The substantial demands of the Chinese market is evidenced by these developments and vindicates the company's decision to invest in the new clean room factory to provide constant supply of high quality Australian products to the Chinese market,’ said Dr Li, Chairman and major shareholder of Food Revolution.
Vindicated indeed! Two days after that first announcement was made, the company reported that it had received a $2 million order for its hand sanitiser.
Unsurprisingly as well, since that first announcement on 18 February, the Food Revolution share price has skyrocketed, rising over 60%.
Its stock rose another 5% today, to 10 cents per share.
Commercially speaking, Food Revolution’s pivot makes a lot of sense. There’s demand, and a lot of it. In fact, a number of media outlets are reporting a 'global shortage' of hand sanitiser. And unlike cryptocurrencies and block-chains; the benefits of hand sanitiser is very tangible.
Interested in how the Coronavirus is impacting other ASX-listed companies? Click here now to discover 5 obscure companies that have seen their share prices soar off the back of the Coronavirus crisis.
This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.
React to global volatility
Market volatility continues as coronavirus concerns amplify. Trade with IG and take advantage of:
- Tight spreads – from just 1 point on major indices, and 2.8 on US crude
- Guaranteed stops – they’re free to use, and only incur a fee when triggered
- Round-the-clock assistance – our highly skilled team are available when you need support
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of spread betting and CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.