Wipeout: Silex Systems Ltd shares plummet 45% on market update

Nuclear energy technology developer Silex Systems Ltd (ASX: SLX) saw its shares smashed at the open this morning, falling 45% to $0.35 at the time of writing, after the company announced that its exclusive Licensee, GE-Hitachi Nuclear Energy, is looking to exit the market.

GE and Hitachi hold 51% and 25% stakes in the Global Laser Enrichment (GLE) joint venture, which they are exiting due to changing business priorities and subdued market conditions.

This has put Silex and remaining 24% shareholder Cameco in a bit of a pickle, given that the joint venture arrangement was required to fund the development and roll-out of Silex’s Silicone-Laser Excitation uranium enrichment technology. Silex announced that it is looking for alternative investors, and is considering funding the remainder of this calendar year’s development costs, up to A$10 million, out of its own pocket.

Making up for gained ground

Today’s fall is a substantial reversal, given that Silex shares recently soared as high as $0.70 after an operational update in February revealed that the company had cash of A$55 million, or approximately $0.32 per share. After this morning’s falls, the entire company is valued at a bit under $60 million.

The departure of its major backers was likely a deal-breaker for many Silex shareholders, who have waited patiently for years while the company develops its proprietary technology. Fortunately for shareholders, Silex’s expenses have been limited in recent times, permitting the company’s balance sheet to coast along in semi-hibernation compared to a number of other unprofitable technology businesses.

That could be about to change, especially if Silex has to go down the path of funding its own commercialisation.

Is nuclear power the answer?

The buzzword of the year is renewable energy, which may lead some investors to believe that nuclear power is going out of fashion. Statistics from the International Atomic Energy Agency suggest otherwise however, with 444 nuclear power plants currently in operation generating approximately 10% of the world’s power. A further 64 plants are under construction.

There’s no guarantees Silex can claim a piece of the nuclear pie, but the premise of its technology is compelling and likely to be attractive to nuclear power investors. However, having just lost its major backer, I believe buying shares today is a high-risk and highly speculative activity, despite the falling price.

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Motley Fool contributor Sean O'Neill has no position in any stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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