Farmmi (FAMI) stock forecast: Investing in mushrooms

Farmmi (FAMI) is a Chinese agricultural producer based in the city of Lishui specialised in making and marketing mainly mushrooms and other fungal derivative products.

The company was founded back in 2003 by chair and CEO Yefang Zhang and made its debut as a publicly listed company on the NASDAQ exchange in February 2018.

Since that initial public offering (IPO) at a price of around $6 a share, the Farmmi stock price has suffered a general decline, and currently (9 December) trades at around $0.25 following the significant dilution of shareholders’ holdings in two capital raises in 2021.

But despite the long-running slump, the stock has trended upwards in recent weeks after it secured the minimum bid requirements from NASDAQ until March 2022. With a strong position in the growing wellness market and improving financials, could the FAMI stock price forecast be looking up?

What does Farmmi (FAMI) produce?

Farmii is an agricultural production and marketing company specialised in producing mushrooms and related products that it supplies to restaurants, cafeterias, specialty stores and other customers.

The company operates primarily in mainland China, which accounts for 94% of total sales, but also in international markets such as Japan and the US, where it is seeking to expand.

Four main products provide Farmii’s income: Shiitake mushrooms, wood ear mushrooms (Mu Er), other edible fungi and other packaged dried fungi, which are sold both directly to stores and restaurants as well as being marketed through the company’s own online platform, Farmmi Jicai.

The majority of sales stem from the first two products, with the wood ear mushrooms a common ingredient in Chinese holistic medicines, which are growing in popularity and sales both domestically and abroad.

Farmmi stock analysis: Can the mushroom seller regain post-IPO highs?

Since first listing in February 2018, the Farmmi stock value has suffered. The price declined steadily from a listing of $6 to around $2 at the beginning of this year amid underperforming financial results and loss-making.

FAMI struggled to keep up sales during the pandemic-affected 2020 financial year, and by the beginning of 2021 began seeking new sources of capital to support its turnaround plan.

The company raised $48.3m in April by issuing 141m new shares at a valuation of $0.30, below the then trading price of just under $1 a share, pushing the price down significantly with current investors heavily diluted.

It followed that up with another issue of 368m shares in September, with the price further lowered to an offer of $0.22 each, raising $81m.

The dilution combined with poor previous financials has pushed the stock down from a February 2021 high of $2.21 to currently trade at levels around $0.25.

In recent trading days the shares have shown more volatility, rising and falling by as much as 9% amid news that the company had been granted the…