Aqua Shares Flow In Reverse…What it Means

Today was a major reversal day for Aqua Metals. Shares opened at $11.75 then traded down to $10.50. Did I say “traded down”? The movement was so sharp that maybe the better term would have been cratered?

Either way, owners of AQMS stock were on high alert. This is not the first time AQMS shares have been hit with investors wondering what is going on. This company is a controversial name, with bulls (like myself) convinced the technology is going to change a $22B industry. Meanwhile, the bears publish articles that call AQMS “as toxic as the lead they produce”. When you have situations like this, sudden drops can disrupt even the most steadfast bull’s morning.

Of course, the shares ended up reversing and closing near their high, up 2.4% on the day. This reversal day comes the day after the company pre-announced revenues for the second quarter. Did I say “revenues”? Maybe I should have said “a lack of substantial revenues”, as the number was well below what traders had expected.

I have been telling people for a while that this quarter would likely be weak. I’ve also been saying that it’s all in the guidance for AQMS. The reversal day is, therefore, very meaningful to me, as an investor. What it tells me is that the bad news is priced into the stock. Investors are (rightfully) looking through the near term at the long term picture. Which is, by the way, absolutely huge if Aqua Metals gets it right.

The most important piece of information on the pre-announcement, in my opinion, was the maintained guidance. Stephen Clarke, the CEO, has always tried to get investors to focus on the bigger picture than one Q’s revenues or the exact date of production starting. Here’s what he said in the press release.

“(We) are working to install the balance of our AquaRefining modules as we work towards our goal of achieving 120 metric tonnes per day of capacity by year end. We look forward to delivering sustainable, long-term results for our shareholders.”

Now, I’m not going to tell you that it’s game over for AQMS and they have won. There is still a ton of execution left for them. I believe strongly that they will get it done, but it will take time and there will likely be more short attacks along the way.

I will say this, however. The share action, reversing hard the day after “negative” news is quite meaningful. It means that the share have moved from weak hands to strong ones. It means that investors who own AQMS own it for the right reason (the future) not the wrong reason (last quarter’s results). It also means that there is an underlying bid in the stock, which tells me institutions are now getting firmly on board.

The next couple weeks should be very telling. Aqua Metals is hosting two investor days in early August, followed by their official earnings report and conference call. I expect the shares to be volatile, but am now convinced that the stage is set for the stock to start acting positively if/when the Company starts giving us proof of execution on the bigger picture of 120 TPD at year-end, and many more facilities to come.