XPON Technologies (ASX:XPN): Here’s why its shares skyrocketed >300% in just a few hours

XPON Technologies (ASX:XPN) achieved something today (Monday May 5) that few companies achieve – rising more than 200% in a single day. As of 2.30pm, shares are 2.4c, 300% up from the 0.6c per share it closed Friday at. Even so, the ASX penny stock is still capped at $5m.

Why did it rise? An acquisition of a company called Alpha Digital that will purportedly ‘Accelerate AI-Powered Growth’. Are investors overreacting just because the company mentioned AI, or is it really as game-changing for the company as the share price reaction suggests?

XPON Technologies actually existed before the surge

Some might say Xpon’s rise was due to the AI-hype, but this has not been the first time the company has mentioned AI. Open its FY24 results presentation and it reads,’ Xpon is a leading AI marketing technology company’.

‘We help businesses simplify complex marketing challenges and achieve superior ROI from their customers’.

The company closed that period with $9.3m in revenue (up 5%), an ‘operating EBITDA of $1.3m in the black, but a ‘statutory EBITDA’ of $5.5m in the red due to losses from displaced subsidiaries and corporate expenses. It has a $3.4m cash position and was targeting cash flow break-even.

Xpon’s flagship product was Wondaris – a customer data platform that helps companies quickly and easily build high-value audiences from their 1st party data (that is to say data from its past, present and prospective customers). The company boasted a significant client list including Youi, Ofex, CanStar, Harvey Norman, Flight Centre, Webjet, Lorna Jane, Domain, Stan, Nne and the University of Adelaide.

By using Wondaris and other products, clients centralise data from all the public cloud vendors (i.e. Google, Azure, AWS and Snowflake) and activate them into marketing channels with simple, clickable workflows. can save manual hours of effort, improve customer segment and do so in an automated way.

Now it’s acquiring Alpha Digital

The reason for the exponential share price increase was the acquisition of Alpha Digital. Alpha Digital is a digital marketing business that had been a long-term channel partner of Xpon. It made $4.6m revenue and $0.7m EBITDA in the past financial year. Xpon has told its investors that the purchase can fast-track the journey to cash flow positivity and EBITDA profitability.

The deal will cost $1.72m, $180k of which will be paid in Xpon shares and the balance through a vendor loan and an 8% interest rate and will last 3 years. And extra $891k in performance based earn-outs may also occur dependant on meeting EBITDA targets.

Arguably what excited investors was the promise that more acquisitions could be to come. It doesn’t look like Alpha has something like an exclusive game-changing technology that Xpon can deploy – its more a case that it will be able to take on Alpha’s customers and derive revenue from them, more than Alpha would without Xpon’s tools.

Xpon told its investors the deal would add $4m in recurring revenue and at least $0.8m EBITDA in FY26. In that sense, it is understandable investors are excited. It is plausible some new investors bought in who were unaware Xpon was already in AI and thought this new M&A deal got it there. Perhaps some just saw the word ‘AI’ and bought like it was 2023 all over again. Only those investors personally know the truth.

Conclusion

The share price surge of Xpon would suggest it has bought a new business that’ll be a game changer, pivoting it into a new direction. The first part is true, but we’re not so sure about the second – we think it’ll just be a case of more customers being brought on. Still, as a penny stock, such volatile share price movements in a day are not completely unprecedented. Even if a re-rating was deserved, we are not so sure it deserved a ~300% re-rating, but we could be wrong and see it rise even further in the weeks and months ahead.

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