Senetas Corporation Limited (ASX: SEN) has been issued a speeding ticket by the market watchdog regarding the sharp increase in its share price on Friday.
Who is Senetas?
Senetas is a small cap technology group that provides high-speed data encryption hardware to business and government customers, which is designed to protect data while it is travelling between sites.
The company was awarded NATO Certification 12 months ago, providing greater certainty regarding the integrity and security of its products as well as a competitive advantage over would-be rivals.
What happened to the share price?
Senetas has generated enormous returns over the last 12 months, climbing from 5 cents to a high of 22 cents in July this year. It retreated in price over the following months and closed at 15 cents on Thursday last week.
On Friday however, the shares soared as much as 26.7% before ending the day 20% higher at 18 cents. At the same time, more than 13.3 million shares changed hands, compared to 1.1 million on Thursday.
This activity caught the attention of the ASX which issued Senetas with a "please explain" letter. According to Senetas, it was not aware of any information that it has not announced to the market that could explain the activity.
Indeed, it's not uncommon for small-cap securities to experience double-digit percentage movements, but it is important that the regulators stay on the companies' backs to ensure they are following the listing rules. My colleague Mike King recently wrote about this following an ASX enquiry into the movement of another company, Techniche Limited (ASX: TCN).
Should you buy?
With no explanations provided, it's possible that investors simply saw an opportunity to buy a promising tech stock at a beaten down price. Although the shares aren't as cheap as they were last week, Senetas could still be a reasonable prospect for long-term investors. Just keep in mind however that it is a riskier investment prospect and should only be purchased as part of a well-diversified portfolio.
