Regardless of all of the current inventory market turmoil, the attract of penny shares stays as robust as ever. Investing in these tiny enterprises comes paired with extraordinary threat and volatility. But all it takes is one success story to ship a portfolio skyrocketing.

Nearly all penny shares promise the world within the type of explosive progress potential. But, sadly, few ever truly ship on such guarantees. In any case, analysing enterprise financials not often leaves a very good impression as most of those companies are pre-revenue, not to mention pre-profit.

As an alternative, funding decision-making typically needs to be made primarily based on long-term potential and qualitative traits akin to expertise and management. And with that as the standards, Helium One International (LSE:HE1) has been turning a variety of heads these days.

A future business chief?

For the reason that begin of 2024, the Helium One share price has exploded by over 300%. But zooming into the final six months, the inventory’s down by virtually 40%. This see-saw movement is nothing new for penny shares and is probably going being created by short-term merchants taking advantage of the inventory price volatility.

Beneath all this chaos lies the enterprise. And from an operational standpoint, Helium One has made some spectacular strides these days. The truth is, the helium exploration enterprise has only recently submitted its utility for its first mining license in Tanzania. This got here off the again of a accomplished feasibility research which confirmed promising proof of enormous helium deposits inside the group’s exploration space.

What does this imply for traders? Offering that the license is granted and the feasibility research’s correct, Helium One will quickly be transitioning from exploration to manufacturing.

In different phrases, income may very well be simply across the nook. And with helium fuel costs on the rise, courtesy of upper demand from the healthcare, aerospace, manufacturing and transportation industries, the group might quickly develop into flooded with money.

Time to purchase?

As encouraging because the agency’s progress has been, there’s nonetheless an extended street forward. Even when mining licenses are granted, transitioning to a production-ready enterprise comes with its personal set of complications and prices. And whereas the enterprise has round £8.7m of money on the stability sheet, that’s seemingly not going to be sufficient to see this transition accomplished.

Since Helium One isn’t more likely to be eligible for low-cost debt, administration’s fundraising actions will seemingly need to be carried out by fairness. And, sadly for shareholders, meaning dilution, which is one thing that’s already began going down.

In the long term, this dilution might show insignificant if its Rukwa undertaking lives up to expectations. Nonetheless, a market capitalisation of £60m regardless of having no income stream means that a variety of this progress potential’s already baked into the inventory price.

Due to this fact, personally, I’m not speeding so as to add this penny inventory to my portfolio proper now. However it’s undoubtedly a enterprise I’m conserving shut tabs on shifting ahead. And as soon as helium manufacturing’s beneath method, I could need to rethink my place.