Why this share rallied 500% in one day

There were big gains among small-caps today, but one company eclipsed the rest. Find out who.

A slice of Hornby (LSE:HRN) history gave investors the platform to jump aboard the model railways firm today, with shares 15% higher during a strong session for several small-cap stocks.

A press release celebrating 100 years since Frank Hornby announced the first clockwork tinplate locomotive, described how customers have stuck with the company through good times and bad, including the current Covid-19 crisis.

Sales have held up well during the lockdown, with the brands of Hornby, Scalextric, Airfix, Corgi, and Humbrol helping families make the most of having more time on their hands. 

• Stock market rally poll: too much too soon, or only the start?
• Trading tips: how to play the recovery and mitigate risk

Hornby said: “We have found many new and returning customers purchasing our products. Families are building plastic kits together, bringing out their railway systems, setting up their slot car racing sets and introducing our brands to their children and grandchildren.”

The update ahead of a fuller trading statement due on 18 June helped shares jump to 37p, which is their highest level since late February. They had plunged to 26p in mid-March.

Source: TradingView. Past performance is not a guide to future performance.

The day's best performer

Hornby's rally, however, was pedestrian compared with the near 500% surge for fellow AIM-listed stock Adams (LSE:ADA), following disclosure of its investment in Oxehealth, whose digital video camera data can be used to measure the vital signs and activity of patients.

Adams, which is primarily focused on special situation investment opportunities in UK and European small and mid-caps, has subscribed for 21,360 new shares in Oxehealth at a price of 2,619p for a total cost of £566,489. It will have a 2.4% holding in Oxehealth, with cash balances of about £240,000 remaining following the investment.

Oxehealth's Digital Care Assistant platform has been deployed since 2018, including in mental health and care home facilities in the UK. Recent data showed a 48% reduction in falls in dementia patients and a 71% reduction in spend on enhanced observations.

The investment, which is part of a fundraising round worth £5 million, will help Oxehealth with its continued expansion in the UK and internationally. Chairman Barney Quinn said: “The investment shows the faith in the Oxehealth Digital Care Assistant and the measurable benefits it brings to patients, clinicians and managing healthcare budgets.”

But why did the shares, which currently trade anywhere between 16p and 40p, jump from 7.5p to as high as 45p today?

Strategic investor Richard Griffiths owns 77.3% of Adams, so the shares are highly illiquid, meaning there are few around for retail investors to buy. That can make them hard to trade in larger quantities at the advertised screen price. The difference between the buy and sell price - the spread - is also significant, so investors are warned to be careful when trading this stock.

Source: TradingView. Past performance is not a guide to future performance.

Eco Animal Health (LSE:EAH), which makes pharmaceutical products for global animal health markets, was another strong AIM-listed performer after a better-than expected trading update.

Revenues and earnings for the year to 31 March will be significantly ahead of market forecasts, with the company also reporting limited impact from Covid-19 and a continued recovery in its  Chinese and US markets. The company's products include Aivlosin, which is an antibiotic for treatment of respiratory and enteric diseases in pigs and poultry.

ECO's shares fell sharply towards the end of 2019 when an outbreak of African Swine Fever (ASF) in China provided significant headwinds in its largest market.

China-US trade tensions exacerbated the effect, with US swine producers unable to capitalise on the anticipated export market created by the pork shortage in China. This led to overproduction and depressed prices and margins in the United States. 

• Company fundraisings: what you need to know
• IPO schedule for 2020 just got interesting
• Take control of your retirement planning with our award-winning, low-cost Self-Invested Personal Pension (SIPP)

CEO Marc Loomes said today: “ASF had a major impact on our business in China during the first half of this financial year but I am pleased with the recovery in that territory and progress elsewhere.”

Shares jumped 31% to 263p, which compares with 357p in November and 135p in mid-March.