Investors think 4DS Memory is back from the dead, but it really isn’t

Nick Sundich, October 5, 2022

When a company is down, investors take any good news as a sign of life and so they did with 4DS Memory (ASX:4DS) this morning. But we think investors are getting ahead of themselves.

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4DS Memory was dead and buried, but is it back?

Six weeks ago, shares in 4DS Memory crashed over 60% after it revealed the latest lot of wafers had memory cells with problems in being scaled to dimensions suitable for Storage Class Memory applications. The company admitted it could not go much further without resolving this issue.

This morning the company told shareholders it had identified the most likely root cause – the modified etch process in the latest batch of wafers. It said it was exploring alternatives to the etch process, but would also look to optimise the etch process.

4DS Memory (ASX:4DS) share price chart (Graph: TradingView)

4DS Memory isn’t back

Today’s 20%+ share price rise indicated shareholders’ optimism. But the devil lies in the details of the announcement and in recalling the company’s track record.

4DS Memory told shareholders that the success of the optimisation could only be demonstrated by electrical tests performed on the platform lot after successful manufacture and delivery to 4DS facilities. It also noted that the probability of a successful optimisation was unknown.

To put it simply, there’s a long way to go. We also observe that it will likely need to undertake yet another capital raising some time in the next 12 months, and that was even before accounting for the increased development costs (whatever pathway the company chooses).

So, we wouldn’t be jumping back onto this one at the moment. The risks and uncertainties are just too big right now.