In recent weeks, Renergen Limited (JSE: REN) has weathered a storm of challenges, with the share price coming out battered and bruised. South Africa’s pioneering on-shore liquid natural gas and helium producer found itself at the centre of a fervent social media storm orchestrated by the relentless shareholder activist Albie Cilliers. This turbulence resulted in an 18% dip in the company’s share price just two weeks ago, followed by another significant 29% decline last week.
In the face of mounting pressure, Renergen recognized the necessity of addressing the public’s concerns head-on. The clamour from the press and social media forced the company to heed its shareholders’ call for a formal response. And respond it did, with a resounding statement released this Monday.
In a bold move, Renergen unequivocally distanced itself from any alleged involvement with state capture, putting to rest speculations that it had any connections to Gupta-gate implicated Trillian Capital Partners and Integrated Capital Management. The company also vigorously defended its indisputable rights to produce helium, quashing doubts raised by Cilliers regarding its mineral production rights.
As questions swirled about the chronology of helium production, Renergen set the record straight. They announced back in January that they had successfully produced liquid helium during the commissioning phase. However, a setback in the form of a leak was discovered shortly after that. In June 2023, this issue was transparently communicated to their valued shareholders in the quarterly report. The company swiftly took action to rectify the situation, with the helium cold box, the source of the issue, being repaired and returned to the site as reported in the September quarterly update.
Renergen’s willingness to confront the allegations and concerns that plagued its recent history has not gone unnoticed. Investor confidence, which had momentarily wavered, has found renewed strength. The share price has rebounded impressively, surging by a remarkable 31% in the opening days of this week. As the dust settles, Renergen hopes to return to its previous trading levels, as investor confidence in its management seems somewhat restored.
Technical
On the 1D chart, a descending triangle breakdown has been sustained, fuelled by the social media onslaught, which eventually bottomed out on Friday at around R8.94 per share. Since then, the price has recovered swiftly, retracing toward the Fibonacci midpoint from the breakdown level at R13.33. However, with the 50-SMA (blue line) trading well above the 25-SMA (green line), the momentum still favours the downside, with declining volumes on the bullish recovery.
If the Fibonacci midpoint at R13.33 fails to withhold the share price momentum, an additional push toward the 61.8% Fibonacci golden ratio of R14.36 is likely. The 25-SMA then offers additional resistance at around R15.41 before the price can retrace the entire selloff in the recent weeks, where the triangle support is established at R17.69.
However, should the price remain below the R14.36 level in the upcoming sessions, pressure could remain on the stock, with support established at R11.11 on the lower end. Any bearish momentum below this level could lead to a retest of the neckline support at R8.94 in the longer term.
Summary
After a relentless social media onslaught, Renergen’s management cleared the air regarding the various claims made against the company. With the share price recovering, a breakout above R14.36 could lead to a newly formed uptrend, with higher resistance established at R15.42 and R17.69.
Sources: Koyfin, Tradingview, Moneyweb, BusinessDay
Piece written by Tiaan van Aswegen, Trive Financial Market Analyst
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