Britain - Will they stay or will they go? I say they're staying

There's always something happening in the world to put investors on edge.  Last year it was the recurring possibility of a US default on its debt, but as everyone knows it didn't happen.  Before that it was the situation in Greece.

Now its today's so called Brexit vote.  I am of the strongly held opinion that, again, its much ado about nothing, that Britain will remain in the Euro Zone.  When push comes to shove British voters will vote for the devil they know, as opposed to the devil they haven't known since 1973.

In any case it won't be long until we know, but not until after the closing bells ring on North American markets.  In the interim I expect a rocky day and then a big surge tomorrow when the results that Britain has voted to remain are announced.

Resverlogix - Short interest climbs 1,447%

If you're a Resverlogix shareholder (RVX.TO) relax, its not as bad as the subject line makes it appear.

As noted at the end of MY RECENT BLOG POSTING about Resverlogix,, short interest up to May 31st 2016 was only 1,500 shares.  As per the most recent update through to June 15th 2016 the number of shares sold short climbed to 23,200 shares.  To put that in perspective 23,200 represents a whole two one hundredths of one percent or 0.02% of the roughly 105 million shares outstanding. But it is a big jump in percentage terms.

So why do a blog post about it?

Because I do think there is some possible significance.  The trading of RVX is incredibly thin, Yahoo Finance puts the 3 month average volume on the TSX at just 16,993.  There are many days in fact where volume doesn't even reach 10,000.  On June 14th, 15th and 16th the total TSX volume each day was just 3,800 then 6,900 then 5,900 respectively.

So what does it mean? Is this a bear raid?

Is there someone looking expecting bad news or a failed trial who's looking to cash in on a big drop? I highly, highly, highly, doubt it....not with just 21,700 sold short over this two week period.  The best case scenario for a short seller is if a stock goes to $0.00 and gets de-listed, then there's no need to cover.  Were that to happen with RVX then the party or parties who sold 21,700 shares short would stand to make a little over $20K.  If someone or someones were confident that RVX was going to drop big I would expect to see 10, 20, 30 million or even more shares sold short, not a piddly little 20 odd thousand.

Why short such a small amount?

I consider manipulation by a party or parties looking to buy in or add to an existing position to be a distinct possibility.  20K short on a stock trading around $1 is almost meaningless, were it not for the fact that it represents a full day's trading volume, a little more in fact.  With volumes in RVX being so light its my opinion that parties looking to manipulate the share price, that RVX can be pushed around like the puck on an air hockey table.

Reservlogix is an incredibly speculative investment, and I am long so I may be suffering from something called "confirmation bias", I full acknowledge that.

Any thoughts and/or comments are welcomed, as always please keep it clean and respectful.

Elite Pharmaceuticals - Is the herd about to storm in? (ELTP)

How do you find out about potential investments?  There are somewhere around 20,000 companies that trade on various exchanges and OTC in the United States. That's an awful lot of DD to preform if one wanted to research all of them.  If you examined 10 each and every day for a year you'd hardly put a dent in the pile.

That's why stock promotion and investor relations type services are everywhere.  There's a lot of competition out there for companies trying to attract investors.  And for companies that use their shares as capital to keep the lights on and pay salaries, it can be a matter of survival.  

Elite Pharmaceuticals popped onto my radar in a curious way.  I use Google as my primary source for news.  When I click on my news feed I get links to stories divided into several different categories: Top Stories, World, Business, Sports, Entertainment etc.  There's one category that I really like, its called "Suggested for you".  I assume Google puts news stories here based on my search history.  I've done a lot of searches lately including the keyword SEC, so I'll often see stories that are about the Securities Exchange Commission.  I also like listening to Willie Nelson on You Tube so I'll get links to stories about the last surviving King of outlaw country.  

I've also done a number of recent searches that include the term "OTCBB", and today there was a story included in that "Suggested for you" section about Elite Pharmaceuticals entitled:  Record Sales Spark Elite Pharmaceuticals (OTCBB:ELTP).  

The linked story takes me to a site called MicroCapDaily and it provides a very bullish write up of Elite, citing a 150% increase in revenues right off the bat.  Its a well written piece and very positive in tone.  You can read the entire story by clicking the link above but I will include this little snippet at the very end.  

• Currently trading at a $246 million market valuation ELTP does have $11 million in the treasury, manageable debt and fast growing revenues reporting $12.5 million in sales for fiscal 2016 up 150% from last year. ELTP has fast become an Investors favorite; the Company is fully-funded moving forward, has nineteen FDA approved drugs to be manufactured, approximately eighteen more in the pipeline in various stages with numerous partners, and just announced they successfully completed the studies for opioid SequestOx(TM) and in January submitted their first NDA. We will be updating on ELTP when more details emerge so make sure you are subscribed to Microcapdaily so you know what’s going on with ELTP.

Am I sold on ELTP as a long term investment?  Uhm.....no, anything but.  After perusing their most recent 10K, for the long term I'll definitely take a pass.  With over 726 million shares outstanding, an accumulated deficit of over $140 million and having reported losses every year from 1990 forward, I don't see this as a buy and hold play.  That is my opinion, others of course can disagree.

But just because I'm not sold on ELTP as a long term investment vehicle, that doesn't mean it might not be suitable for a short term trade.  

Why?

I am certain there are a lot of other people in the world who use Google as a source for news in the same manner that I do.  And I'm equally certain that there are other people who have done searches which included "OTCBB".  I think its highly probable that this "news story" about Record Sales for Elite, that it could be popping up on a lot of news feeds.  Even though there are over 700 million shares outstanding, at about 35 cents per share an investment of just $5,000 equals about 14,200 shares.  

If the dotcom bubble taught us nothing else, it showed that fundamentals are ultimately meaningless. All that really matters is supply and demand.  And with this MicroCapDaily story I definitely see the potential for a significant level of buy side interest to pour into ELTP.

I'm viewing this as, potentially, a prime Greater Fool type play.  Despite what I view as incredibly poor fundamentals, I see the possibility for a lot of fools to come storming into this stock starting Monday, and I might just be one of them.  The thinking is that if the PPS starts climbing, that even Greater fools will show up and be willing to pay even more providing the possibility of a profitable short term trade.  

I will have to see how my day is shaping up tomorrow, I might just be jumping on this one, but not for the long term.  With a stock like ELTP I don't want to be in a situation where I'm unable to watch it for any extended period of time.  With a penny stock like this I'd be afraid of going to mow the lawns only to come back to find the PPS down big.  

Ziopharm - What happens when the money runs out?

Warning, this post is going to be relying heavily on Ziopharm's SEC filings.  If you are the type of investor who prefers Press Releases to audited corporate filings, then you you might just want to stop reading right now.

Those who've done their Due Diligence already know that Ziopharm is well into its second decade of existence and has achieved only minimal revenues.  You also know that the accumulated deficit up to March 31st 2016 is over half a billion dollars. With existing capital resources only foretasted to be sufficient to get the company into the 4th quarter next year, and maybe not even that long, the question is what happens then.  Here is what the most recent 10Q filing says:

• The Company has operated at a loss since its inception in 2003 and has minimal revenues. The Company anticipates that its losses will continue for the foreseeable future. At March 31, 2016, the Company’s accumulated deficit was approximately $504.7 million. Given its current development plans, *the Company anticipates cash resources will be sufficient to fund operations into the fourth quarter of 2017. The Company’s ability to continue operations after its current cash resources are exhausted depends on its ability to obtain additional financing or to achieve profitable operations, as to which no assurances can be given. Cash requirements may vary materially from those now planned because of changes in the Company’s focus and direction of its research and development programs, competitive and technical advances, patent developments, regulatory changes or other developments. *Additional financing will be required to continue operations after the Company exhausts its current cash resources and to continue its long-term plans for clinical trials and new product development. There can be no assurance that any such financing can be obtained by the Company, or if obtained, what the terms thereof may be, or that any amount that the Company is able to raise will be adequate to support the Company’s working capital requirements until it achieves profitable operations. (* emphasis is mine)

Next we'll look at the current cash situation

As of March 31, 2016 the same 10Q filing linked above lists cash and cash equivalents at $140,717,000 which is anticipated to be sufficient to fund operations to the end of next year.  From April 2016 to December 2017 equals a total of 19 months, which means the company is anticipating burning through about $7.3 million per month on average.  Of course the filings only say "into" the 4th quarter of 2017, which means it may not be enough to last right up until the end of the year.  The 4th quarter ends December 31st, but if they only have enough to last to the end of November 2017 then the burn rate would be $7.8 million per month on average.  

Using a middle figure of $7.5 million per month means that Ziopharm would be burning through about $90 million a year.  And given that they're only at the early stages it can be reasonably expected that their costs are going to escalate if they are able to progress into latter phase II and phase III trials.

The last capital raise via an underwriting agreement with JP Morgan Securities LLC provided Ziopharm with approximately $94.3 million dollars.  That was in February 2015 and involved the issuance of 11,500,000 shares at a price of $8.225 per pursuant to the underwriting agreement.  

Going forward it would appear that $90 million or so, that it would only provide enough capital to operate the company for about one year, and with costs escalating probably not even that long.  

If Ziopharm is looking to have enough capital to get them through another 2 years past the 4th quarter of 2017, then they're likely going to need close to $200 million in my view.

Bottom line

Sometime next year, barring a buyout, Ziopahrm is going to be running seriously low on capital to operate their business and to fund clinical trials.  Without a substantial revenue stream it is hard to envision them obtaining traditional financing through a lending institution.  A bond issue seems unrealistic for the same reason.  How can a company pay interest on a bank loan or on bonds when it doesn't have a steady, reliable source of revenue and an accumulated deficit of over half of a billion dollars?

The only possibility I see is more dilution.  How much will depend on the price shares are trading at when its done.  To raise $200 million, if they could get an underwriting agreement at $10 then that would mean 20,000,000 more shares.  Right now the PPS is trading around $6, at that price point its about 33.3 million more shares on top of the 131.8 million that were outstanding as of March 31st 2016.  

Thankfully, according to Ziopharm's filings, the company is authorized to issue up to 250,000,000 common shares and up to 30,000,000 preferred shares. So even if the PPS continues to erode they should still be able to issue enough shares to keep operating for a few more years before having to consider the possibility of a share consolidation in my opinion.

FULL DISCLOSURE
I sometimes like to have some skin in the game with the stocks I write about, and in the case of Ziopharm I do own some put contracts so my views are not without bias.

ZIOP - Institutional ownership drops, Univ of Texas opts to sell remaining shares

For the period up to March 31st institutional ownership for Ziopharm is reported at 56,804,195 shares or 43% of the 132,000,000 outstanding.  That's as per Nasdaq's site using the most recent 13F filings.

75 institutions reported selling 9,478,065 shares, and 78 reported buying 5,399,666 shares for a net decrease of 4,078,399.  31 institutions reported selling out completely a total of 4,959,092 shares while there were 23 new positions reported for 2,116,425 shares.  That's a net difference of 2,842,667 shares favoring those selling out.

http://www.nasdaq.com/symbol/ziop/institutional-holdings

The biggest seller was the University of Texas Investment Management Co, or UTIMCO for short. They chose to sell their remaining 2,503,575 shares, all that was left from the 11.7 million shares they received for "choosing" to partner with Ziopharm.

I know there are some who probably think UTIMCO had no choice but to sell, thanks to some false information posted to Seeking Alpha by a blogger with the User Name Options2Wealth.  In a SA instablog this writer said that UTIMCO was obligated to sell the shares because of a charter mandate.  

Allow me to set the record straight on that score.

This error of thinking that UTIMCO was mandated to dispose of their shares in ZIOP comes from this link:

https://www.utimco.org/extranet/WebData/INVESTMENT/DistributedStockPolicy.pdf

Therein it deals with securities distributed to certain endowment funds, the PUF and GEF funds, standing for Permanent University Fund and General Endowment Fund respectively.  Ziopharm however filed their own 8K dated May 5th 2015 explaining how and when the shares might be sold. The 8K states:

• Pursuant to an Investment Management Services Agreement with MD Anderson, the University of Texas Investment Management Co., or UTIMCO, an institutional investment advisor, holds the License Shares and the Incentive Shares on behalf of MD Anderson and *is authorized to exercise investment discretion and voting power with respect to such shares on behalf of MD Anderson. Accordingly, Dr. Cooper has no voting power, investment power or control over *if or when the License Shares or the Incentive Shares will be sold, if ever, or the timing of the receipt of the proceeds, if any, from the sale of such shares. (*all bolding is mine)

Discretion, for those unaware, means an option or choice.  In other words there was no mandate to sell the shares because they weren't distributed to the PUF or GEF funds.  UTIMCO excercised their discretionary power and "decided" to sell out of their holdings in Ziopharm.  

Why?  UTIMCO represents itself as having an "Equity Bias".  That means they prefer holding equities to other investment vehicles.  Why they decided they didn't want to continue holding their Ziopharm shares though, I don't know.

I would strongly recommend reading the entire filing for those who mistakenly thought UTIMCO had no choice but to sell.  And to those who told UTIMCO "had" to sell, if you want to apologise for your error when I posted about this previously, the comment field is open.

Perhaps Options2Wealth will post a correction on Seeking Alpha.  That would be the right thing to do in my opinion, unless of course he willingly misrepresented the facts in the hopes of pumping up the share price, in which case I won't hold my breath.

ABRW - A sure fire winner or just another OTC hype job

So, is ABRW a slam dunk guarantee to go up from current levels?

Of course not, only complete morons would suggest that any stock comports zero risk, especially an OTC penny stock.  Well maybe not just morons, there might be some sharpies out there who are hoping to get potential marks....uhm, I mean investors, to completely ignore any potential downside.

When it comes to investing there are tons of people out there who will throw money at a good story, without being aware of the potential risks involved.  A great example would be Fuse Science Energy drinks a few years back.  When Tiger Woods signed on with them many thought it was a sure winner. 

If you want to check how its doing now just look up it up, fittingly it trades with the symbol DROP because that's exactly what the share price did.  Once worth dollars it now trades for less than one single penny.  (QUOTE FOR FUSE SCIENCE)

Know the risks people.  I will share a video from the Simpsons, one where Homer jumps into stock ownership when he is blown away by a presentation done by a company called Animotion.

Is that you?  Thinking only of the possible rewards and completely ignoring the risks?

So what are the risks?  If you came across ABRW via social media or from an email blast you might think there are none, that an investment in Búcha Inc is a sure fire rocket trip to the moon.  

Let's take a look at the company's most recent filing.  It isn't audited, but with OTC companies that comes with the territory and is one of the reasons stocks trading on the pink sheets have a less than stellar reputation.  

Here's a link to the most recent 10Q, for the period ending March 31, 2016:

http://www.otcmarkets.com/edgar/GetFilingHtml?FilingID=11366874

In the filing you will find this:

• The Company had an accumulated deficit of $3,619,669 and $3,331,878 as of March 31, 2016 and December 31, 2015, respectively, had net losses of $287,791 and $72,022 for the three months ended March 31, 2016 (Successor), and for the three months ended March 31, 2015 (Predecessor), respectively, and had negative working capital of $98,811 as of March 31, 2016.  These matters, among others, raise *substantial doubt about the Company's ability to continue as a going concern. (*emphasis is mine).

Another pertinent fact in my opinion is share structure, specifically the number of authorised versus outstanding shares.

• Common stock, $0.001 par value, 50,000,000 shares authorized; 15,435,651 shares issued and outstanding

Shares represent capital, when a company has negative cash flow from operations they can use shares to finance things like employee compensation and bonuses, as well as acquisitions and other general purpose needs.

Alright, I can just hear promoters and touts pounding the table screaming: 

"THAT'S OLD INFORMATION"!!!

That it is, and as such I consider it to be priced in.  I often share the view that all publicly available data, news, filings and everything else, that's its already "baked in" to the share price.  Stocks trade on supply and demand, not on old information.  

So what's the news that caused ABRW to go from a 52 week low of 19 cents to a recent high of $1.96?  A gain of over 900% in a little over three months?. That news came out of May 23rd, announcing a merger with New Age Beverages/Xingtea Group and judging by the volumes a lot of buyers stormed in.

https://finance.yahoo.com/news/b-cha-inc-signs-merger-130000897.html

The press release refers to New Age Beverages as a highly profitable "$50 million" privately owned company.  Because its a private company I know of know way to determine on what basis this $50 million valuation is determined.  

Interestingly the total purchase price is listed as being $19,995,000 in the form of an initial $8.5 million in cash, an issuance of $6,995,000 in common stock and finally a deferred cash payment of $4.5 million.  

It would seem that this is quite a coup.  A $50 million company being acquired for just under $20 million.  Not a bad deal for the buyers.  But again, I can't find anything to justify the $50 million valuation cited in the PR.

Bottom line

I'm not convinced.  With all the hype and forward looking, safe harbor protected promise it is my opinion that those who've been buying recently, at or near the recent highs, that over the long term they're going to see their shares fall significantly in value.

Do note however that my opinion is based on the long term, and in the short term I fully expect there to be a lot of up and down volatility.  Given all the pumping in social media I am betting ABRW will have some big swings, both up and down.

I also expect those who are pumping, that they will be touting long term potential, trying to entice buyers on the way up on promises of riches.  And on the way down they'll blame short sellers and manipulation, exhorting those who get trapped at higher prices to average down.  "It was a great deal at $1+, its a steal under a buck".

And I'll bet dollars against donuts that I will come under attack, for this blog to be ridiculed and trashed.....It comes with the territory.  I'm not a broker dealer, nor am I qualified to give investment advice.  I'm just a retail schmo who's been around the public markets for over 20 years, a guy who used to work in the investment sector whose sharing his opinions and views about how the market game gets retail sheep to buy high while the smart money players sell high.

In my opinion this is a text book example of the Greater Fool idea being played out, and its a zero sum game.  Some will end up with shares when its all over and some will have cash.  Good luck

Full Disclosure

I have no position in ABRW long or short and absolutely zero intention of ever taking one out.  And given that his is an opinion piece it is possible that my opinion could prove to be wrong.

ABRW - A great example of stock promotion.....

Hello to all my loyal and dedicated readers, I appreciate both of you stopping by :-)

To everyone else who stumbled onto this site and are unable to locate the backspace key, or have a computer that is frozen and can't escape this pathetic and miserable little blog, well I will try and keep you entertained for a couple minutes at least.

The "rasison d'être" for this blog, (that's a fancy French expression meaning reason for being), is to help educate and enlighten poor retail schlubs like myself about the games that are played in the public markets.  Why are some players able to buy low and sell high?  Simple, that's because there are others doing the opposite, selling low and buying high.

Which group do you want to be a part of?  What's that?  You don't want to be in the group buying high?  Oh....that's too bad, because there is a mountain of effort that goes into trying to get you to do just that.  Would you like an example?

ABRW is the symbol for an OTC listed company, the company used to be American Brewing but is now called Búcha Inc.  Here's the chart:

Looks nice doesn't it?  Don't you wish  you'd heard about ABRW at the start of the year back when shares were trading for between 20 and 40 cents, instead of now when its jumped up near $2?  Yeah, I know...it sucks.  When OTC stocks are trading at or near their lows nobody is talking about them and volume is light.  Then they explode higher, news starts coming out and before you know it they've already doubled, tripled, quadrupled or more.

How did I find out about ABRW?  My (sic) friends at stockreversals.com have been promoting it all over Stocktwits, Twitter and probably in the email blasts they send out, (they stopped sending me mine, I don't know why).  I know this outfit pretty well, having tracked some of their other suggestions, MOBI, CLDN, WBAI, LEJU, SBOT, ZIOP....its a long list and not a pretty one for those who bought in before they all collapsed.

Of course maybe, just maybe this time they could be onto something.  Maybe ABRW will be the exception?  Nah, I don't think so either.  Here's what Stockreversals is saying on Twitter:

StockReversals.com‏@StockReversals

A micro cap with potentially massive upside $abrw small position 1.40 this week. Former top dog at Coke, Ambev and Cott now CEO

• RETWEETS4
• LIKES9
• 

9:04 AM - 3 Jun 2016

4 retweets9 likes

Sounds good doesn't it?  The former top dog from Coke?  Oh boy.....back up the truck and load up. But wait a minute, it always pays to verify claims by pumpers on sites like Twitter.  Let's see if its true:

Alrightee, here's a snippet from a March 29 2016 PR put out by ABRW.

"Mr. Willis was previously a President for Coca-Cola in Latin America...."

Top dog at Coke?  Well.....not really.  He wasn't "the" president, he was "a" president.  A president in Latin America.  Stockreversals wouldn't be the first outfit to stretch the truth, taking a guy who was a corporate president in someplace like Honduras maybe and trying to pass him off as "Top Dog".

But what else are they saying, do they have a target price?  You betcha....just like KTOV which they were predicting $10+ for before the bottom fell out. With ABRW the target is equally lofty for a stock trading at less than $2

StockReversals.com‏@StockReversals

Long at $1.40-$1.45, $ABRW could see 2.50 on breakout. Valuation says $6 to hit low end of industry Price to Sales ratio of 3, now $1.72

• RETWEET1
• LIKES3
• 

5:36 AM - 7 Jun 2016

Do you think these guys are buying?  Nope...neither do I, that's what they want their followers to do. Of course if one group is buying, then another one has to be selling.....And who do you think will end up on the wrong side of yet another Stockreversals recommended trade?  Yeppers, retailers....that's my opinion too.

Good luck