Rakon Ltd’s [NZX:RAK] share price has decreased by 3.45% today on the NZX, trading at 28 cents at the time of writing. The fall came immediately with today’s market open, and shares have failed to move up or down since.

Rakon is a New Zealand GPS tech company that produces specialised technology for GPS instruments.


So why has [NZX:RAK] fallen?

A possible cause behind this drop in share price is the fact that Rakon has recently appointed a new independent director for their board. Keith Watson was appointed to the Board late last week on Friday, 21 September. Could this have sparked uncertainty surrounding this new independent Director?

An independent Director is different to a regular director in the sense that they have a limit on the shares they are able to own in the company and don’t have any conflict of interest or allegiances in making company decisions. Hence they are ‘independent.’

There have been many benefits talked about for independent directors. However, they can create uncertainty as it raises the question of whether their interest in the company’s success is sincere. They are often held to be more reserved and less likely to take risks, to protect their position — though we can’t be certain that will be the case here.

Investors not knowing the changes that could come with the new Director could be a contributing factor to this recent drop in share price.


The amazing success Rakon has seen in the past six months

With the share price reaching an all-time low of 19 cents in mid-May, sceptics have expressed concern with the company’s direction. When this occurred with their share price the company promised they had ‘bottomed out’. This was after they had a total profit in the year ending 31 March 2018 of $10 million, compared to a loss of $13.6 million in the previous financial year.

Since then, the company has seen a steady rise in share price, increasing 32.95% in the past year, with mild fluctuations.

This latest share price drop has raised some important questions.


So where could Rakon shares go from here?

There have been ethical concerns surrounding Rakon Limited crystal technologies being used in weapons GPS systems. In the past Rakon has commented that they ‘…do not know if their products are used by smart bombs and missiles by the U.S. military.’ This perhaps could negatively influence potential investor decisions into Rakon. Another possible issue for the company is the uncertainty surrounding the appointment of new independent Director Keith Watson, though the lasting effects of his appointment remain to be seen.

But if Rakon is able to continue the upward trend in its share price and its financial turnaround over the last year, they could prove to be a leading company in providing GPS component technology on a global stage. It’s one to keep an eye on.


Taylor Kee,
Editor, Money Morning New Zealand