What happened

Shares of AquaBounty Technologies (AQB 0.43%) went up 13.8% in January, according to data provided by S&P Global Market Intelligence. However, the stock at one point traded over 30% higher before a stock offering caused a mild sell-off late in the month. But AquaBounty was motivated to do the offering because it needs the cash for the capital intensive year that lies ahead.

So what

As the global population expands, many see a growing need to sustainably source animal protein. AquaBounty Technologies aims to farm modified salmon in land-based tanks. These salmon grow faster and require less feed than their wild counterparts. And these advantages have some investors buying the stock.

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Image source: Getty Images.

However, AquaBounty Technologies is still very early in its journey. At its main farm right now, it harvested a small batch of unmodified salmon in the second quarter of 2020, as a trial run for its systems and processes. The first harvest of its modified salmon was supposed to have already happened. But the COVID-19 pandemic closed restaurants, resulting in lower salmon market prices. The company is now waiting for a more favorable price before harvesting during this first quarter of 2021.

Therefore, AquaBounty is just barely getting started at one farm. And long term, it will need many more farms to supply this hungry world with protein. The company intends to build a 10,000 metric ton tank facility in Kentucky this year, which is why it filed a $200 million stock offering. Considering revenue is still meager, it needs to fund growth by selling shares.

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Now what

Personally, I find AquaBounty Technologies an intriguing company worthy of more research. That said, investors should understand the risks associated with early stage companies like this. For example, AquaBounty will need to make sure its salmon will have a market -- some retail outlets have vowed not to sell it.

Furthermore, AquaBounty is understandably having a hard time estimating costs. Originally it thought its Kentucky farm would cost between $75 million and $100 million. But when it filed its new stock offering in January, it raised its estimate for the cost of the farm to between $140 million and $175 million. This is understandable because it's never built a farm this size before. But it's a reminder of all the things management still needs to iron out before shareholders can begin reaping the rewards.