Why the Compumedics Limited (ASX:CMP) share price has been smashed today

It has been a disastrous start to the week for the Compumedics Limited (ASX: CMP) share price.

In early afternoon trade the medical device company’s shares are down almost 25% to 44.5 cents.

Why are Compumedics’ shares being crushed?

At the end of May the company announced that it was looking to form a joint venture with leading China-based premium health-check company, Health 100.

According to the release, the two companies were aiming to form a joint venture that would commercialise Compumedics’ Somfit product and technology platform in the China market.

Management stated that if the China Food and Drug Administration gave its approval to the device, Health 100 would purchase 1 million Somfit devices from the joint venture over a two-year period.

This was expected to generate revenue of at least A$133 million (US$100m) over the period for the joint venture, which Compumedics would hold a 49% interest in.

Fast forward to today and things are looking a little mixed.

This morning management advised that due to some unexpected complexities, should a definitive outcome of the current negotiations be achievable, an outcome on the proposed joint venture with Health 100 will be announced within the next 6 to 12 weeks.

Previously it had stated that formal agreements to establish the joint venture would be executed no later than August 16.

What now?

These delays and management’s rhetoric certainly don’t fill me with confidence that a deal is going to be done.

Because of this I would suggest investors resist buying the dip and wait to see what happens. After all, if the two companies fail to come to an agreement I think there’s a good chance that Compumedics’ shares will fall even lower from here.

Instead of risking money in its shares, I would suggest investors look at other small cap healthcare technology shares such as Nanosonics Ltd (ASX: NAN) and Volpara Health Technologies Ltd (ASX: VHT).

As well as Nanosonics and Volpara, I think these top mid cap growth shares could be market beaters this year.

The Disruptors: 3 Revolutionary Aussie Companies to Back for 2018

We’re living in one of the most exciting times in investing history. Innovation and a booming culture of entrepreneurship are constantly creating new companies with the potential to make forward-thinking investors very rich. Now more than ever, one small, smart investment could make a huge difference to your wealth.

That’s why at The Motley Fool we’ve been scrutinizing the ASX to uncover the kinds of companies that we believe could turn into the next Atlassian.

We’ve found three exciting companies that we believe re poised to perform in the new year. Click here to uncover these ideas!

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Nanosonics Limited and VOLPARA FPO NZ. 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 Scott Phillips.

5 ASX Stocks for Building Wealth After 50

I just read that Warren Buffett, the world’s best investor, made over 99% of his massive fortune after his 50th birthday.

It just goes to show you… it’s never too late to start securing your financial future.

And Motley Fool Chief Investment Advisor Scott Phillips just released a brand-new report that reveals five of our favourite ASX stocks for building wealth after 50.

– Each company boasts strong growth prospects over the next 3 to 5 years…

– Most importantly each pays a generous dividend, fully franked.

Simply click here to find out how you can claim your FREE copy of “5 ASX Stocks for Building Wealth After 50.”

See the stocks now