Total Brain’s Share Price Pulls Back after Massive Surge
At time of writing, the share price of Total Brain Ltd [ASX:TTB] is down 13%, after a big gain of nearly 50% yesterday. Total Brain shares are currently trading at 10 cents each.
This is what has been going on with the Total Brain share price since the start of November:
Total Brain’s shares surged on positive coverage in a leading newspaper — we look at what makes the company tick and why the share price fell today.
Total Brain’s share price surge can be traced to positive coverage
This happens to small-cap stocks sometimes — an exclusive piece in a major newspaper generates a lot of exposure for a relatively unknown company.
In this case, it was an article from the AFR.
The article quoted Regal Funds Management’s chief investment officer Phil King as saying:
‘On the back of the latest financing, we think they could break even in two years… And that suddenly would open this up to a new class of investors. Mental health is a huge and growing problem in society today and we all have a responsibility to improve the mental health of society.’
Regal funds was one of the investors involved in Total Brain’s most recent $14 million capital raise.
So it’s important to remember who says what and why.
After a strong run up though, today’s fall could be as simple as profit-taking.
In other words, if you can make nearly 50% in a day, why not cash in? Or at least sell a portion of your stake?
If you had bought in a year ago you would be up over 160% as well.
Trading aside, there are some reasons to believe Total Brain could be onto something.
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What Total Brain does…
For starters, they are operating in an industry that is in the process of experiencing massive growth, mHealth.
mHealth stands for mobile health — a sector that is growing at a compound annual growth rate of 44.2%.
It’s worth US$5 billion now, but Grandview Research projects that this will balloon to US$112 billion by 2025.
The Total Brain app seeks to capitalise on this growth and assesses/trains the brain along four different aspects of your brain’s capacities.
These are emotion, feeling, cognition, and self-control.
It’s a bit like Lumosity or other brain app peers like Headspace (valued at US$320 million) and Calm (valued at US$1 billion).
Total Brain’s edge may lie in the rigorous research backing up its product.
The app came about via brain research conducted by the founder and executive chairman Dr Evian Gordon.
Dr Gordon is a well-respected and well-published neuroscience expert.
They’ve got a huge data set backing up their product — around 600,000 individual brain assessments.
Their product also has 200 brain studies behind it from leading universities like Harvard, NYU, MIT, Stanford, Oxford, and Cambridge.
The algorithms have shown promise in predicting treatment responses to anti-depressants and diagnosing ADHD.
Total Brain’s most recent quarterly reveals a 72% rise in cash receipts to $1.05 million.
They also burned through $8.5 million in 2019 as they completely overhauled their product offering.
Crucially, the company has been quickly growing its customer base, up to 736,679 as of the most recent quarterly.
Often we see that a growing customer base is enough to send tech stocks higher — even if they aren’t monetising that customer base yet.
As the hype cools, the Total Brain share price may continue its retracement.
Overall however, Total Brain’s rapid rise highlights the immense potential present in the small-cap space.
For Money Morning