Money flow positive for Stellar Biotech


There has been a lot of buying in nano cap Stellar Biotechnologies (OTCQB:SBOTF +8.7%) since late July. Prices almost quadrupled from the July 21, 2014 low of $0.60 to the peak of $2.36 on August 28 on a huge increase in volume. Profit taking took over for the next few days, but prices bullishly rebounded as they approached the 50-day EMA albeit on lower volume.

Stellar's business is based on the immune-stimulating protein Keyhole Limpet Hemocyanin (KLH). It maintains an aquaculture facility to cultivate Giant Keyhole Limpets to ensure a constant supply of the protein. KLH is an active ingredient in some pharmaceutical products and certain immunotherapeutic product candidates.

Sales for fiscal Q3 were only ~$100K, however. Its cash balance at quarter's end was $14.8M which management stated was sufficient to fund the company's operations through 2015.

Comments (5)
  • aterosin
    , contributor
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    possible wishful thinking about Ebola vaccine using the mollusks?
    4 Sep 2014, 03:30 PM Reply Like
  • ParaBellum16
    , contributor
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    The recent price action surrounding SBOTF has absolutely NOTHING to do with any sort of Ebola vaccine or involvement with another company that may be working in that space. It has EVERYTHING to do with a Newsletter Publishers promotion that got under way in late June. This promotion used SBOTF as the target vehicle to tease investors with, the ultimate objective being to get them to sign up for their service and then get the "special report" that revealed what was the company they were so excited about. Anyone with any experience at all regarding Stellar Biotechnologies would have recognized the company based on the clues they dropped within 5 minutes of the Publishers video presentation. And if they didn't get it, the good folks at http://bit.ly/13icG4i "unteased" the idea in about 3 minutes and told the world that this was SBOTF which was being used.
    That said, please understand this: what is happening IS NOT a classic "Pump and Dump" scheme. But I see many people using that term to describe it, and that is VERY wrong o their part. It does Stellar and its management a huge disservice and paints them with an unfair brush of underhandedness and deception.
    I'll not go into all the points that make those statements clearly true. I only ask of all to refrain from using that P&D term when talking about SBOTF o these forums. It is very misleading to lesser informed investors and harms Stellar as a reputable company, which it is.
    This is not the first time Stellar has been so used. In June of 2013, NIck Hodge, a Newsletter writer and Publisher, sent out a similar video entitled "Minting Millions From the Magic Molecule." Ironically, at the time of this release, the stock was trading at almost exactly the same level as it was at the time of this recent go-round, ~$0.60. Over the next few months the demand from investors that had decided to buy in went, in spurts and splashes, to peak around $2.35 - again, the near exact level that the price recently hit before falling back. It just happened faster this time, perhaps due to not just one Newsletter promoting SBOTF but (I believe) three. Witness the HUGE increase I volume over the past three weeks. And now, true to form, as the effect of this Newsletter promotion wanes, the price has reversed hitting a low a few days back ~$1.45, and now bouncing back up to the $1.85 range. This is strangely tracking - in rough manner- the price action in Fall and early winter 2013.
    Now, a pure opinion based on all this as to what you may expect for the pricing going forward. This is for informational purposes only and is not intended to be viewed as investment advice.
    As the effect of the Newsletter promotion continues to diminish, I would expect to see the price of SBOTF fall off accordingly. It will happen in see-saw fashion with maybe a couple days of a serious decline in the 20% - 30% range, followed by a dead-cat bounce, then a continuation of the decline.
    Where could it be headed? Ah - the $64,000 question.
    I believe that absent any corporate announcements of meaningful developments in sales or ventures with other companies, the price is going back to where it started, more or less. I'd venture a guess of $0.60 to $0.80 as a base line. Why? because that is where it was before all this hit, and was obviously what investors that believe in the company thought it was worth base on current financials. BTW, the Q3 report that came out a couple weeks ago was actually quite positive showing progress in most all the important financial metrics. This is encouraging for log-term investors.
    In conclusion:
    Stellar Biotechnologies is a very real, very substantive company albeit tiny, micro-cap one. It has a product (KLH) tat cannot be replicated, is very necessary in the Pharma industry to use in clinical trials, and they have a gigantic "moat' around the business which would prevent much if any meaningful competition from developing over the next 5 years or so. They have in place quite a few joint-venture projects with other Pharmaceutical companies where they (Stellar) supply the KLH required for trials at attractive costs, and have as part of those deals arranged to share I royalties should any of the drugs being trialed come to fruition and make it onto the retail market.
    And as a final note regarding SBOTFs legitimacy, note the financial involvement of two MAJOR investors; Samuel Yin, a Taiwanese multi-billionaire who not only invests but also owns / runs/ controls several Biotech companies, most notably Amaran Technologies, his flagship company and the entity that bought the private placement units in SBOTF a year ago. This was a brokered and non-brokered private placement transaction whereby Yin got common stock for $1.05 a share and warrants that carry a 1/2 share value that can be combined into full-share units exercisable at $1.35 per share. These warrants had a 3 year expiration at issuance, so have about 2 years yet to run. In addition to that financial involvement, Yin had one of his top-level executives and research scientists, Dr. Tessie Che, installed o the Board of Directors of Stellar to lend her extensive expertise in not only running a Biotech company but also as a contributor to the advancement of the science behind KLH and the aquaculture farming of the Giant Keyhole Limpet, the source of KLH. Nothing is going to happen at Stellar and go unnoticed or unknown by Mr. Yin - and that's a good thing. He also has done an additional deal with Stellar to provide KLH to his new venture in Botox.
    And then there is Ernesto Echavarria, a Mexican multi-billionaire himself, what currently has a total of some 9,720,833 common shares and 4,833,333 warrants in the capital of the company. These collectively represent 20.07% of the issued and outstanding shares of SBOTF. As far as is known by this writer, Echavarria appears to be somewhat of a passive investor at present, unlike Yin that has several intertwining involvements. But that could change if he desired. Owning 20% or so of a company gives the owner quite a few options we mere mortal will never have
    My reason to giving that very short summation of Yin and Echavarria is to make just one point you need to ask yourself: old men of this stature and experience be laying out this kind of cash, betting on a company that didn't have something real to offer and a way to make it happen? I don't think so. They didn't become billionaires by making foolish mistakes. And I always lie to follow the money when I am making investment decisions. So my take on SBOTF long-term is quite bullish. Short-term is another matter altogether.
    I dashed this note off hurriedly, so forgive spelling and grammar, please.
    Jim Skelton
    The Blind Squirrel
    Disclaimer: I have no position in any security mentioned. I wrote this by myself and have received no compensation from any other entity for so doing. The information contained herein is taken from sources believed reliable, and is intended for informational use only. It is not to be seen as any form of investment advice or recommendation. An investor must perform their own due diligence before coming to a conclusion of whether or not any specific stock ought be bought, held, or sold.
    4 Sep 2014, 05:54 PM Reply Like
  • UNEMON1
    , contributor
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    Great comment! ... Thanks. The effective price of the September 2013 Private placement was valuing SBOTF shars at 0.33 USD each ... when in fact ... SBOTF was trading at 1.93 USD per share.

     

    as you said: The company did receive 12m USD in exchange of approximately 11.5m in SBOTF Shared + 5.75m in Warrants to buy SBOTF shares at $1.35 within the next 3 years.

     

    If you value the Warrants ... (since warrants are pure arbitrage play and their value is independent on the Company Future prospects) ... you will see that the value of all 5.7m warrants together is about 8.1m USD.

     

    --> Fair Value of the Warrants (valued using the BS model) is/was 8.1m USD.

     

    It means ... that in the deal ... the additional 11.5m Shares were valued at only 3.9m USD ($12m-$8.1m=$3.9m)

     

    --> This results in a Valuation price of approximately 0.339 USD for each SBOTF share Issued!

     

    ---------> Please, Recall that a the Time of the dela (09/23/2013) SBOTF was trading at $1.93.

     

    -----------------> This represents a 82% Discount to the Market Price of SBOTF shares.

     

    -----------------> If you were Ernesto or Amaran ... would you not have taken part to the deal? ... I would have.

     

    So, I agree with you ... SBOTF is up only because of a Pump and Dump scheme started last June. PPS will revert to back $1 in the coming weeks (once the Pumping Campaign has ended).

     

    JMO
    5 Sep 2014, 04:36 AM Reply Like
  • ParaBellum16
    , contributor
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    I appreciate you valuation method for the shares. Interesting. But, if I may suggest, it omits one factor that always plays a part in the trading price vs. financially based valuation: investor sentiment.
    Investor sentiment, i.e. how people "feel" about a company and its future, is impossible to calculate. Based on all sorts of opinion and beliefs, it cannot be assigned any real number. How much of the price of TSLA is financially based and how much is sentiment? Or FB? Or GPRO? And so on. A lot of the valuation of these companies and many other tech stocks is pure speculation that springs from nothing other than the imaginations of investors. And so it is with SBOTF.
    Before this recent Newsletter Publishers promotion began, SBOTF was trading at $0.60. There had been very little news or announcements for the previous six months or so, and the run up caused by Nick Hodges first push was well past, the price falling off its high of ~$2.35 (which it hit twice before the final trailing off began), the volume fell back to more normal levels, and this "sentiment" waned as well. That's why I think the $0.60 price is a fair one, and one I expect to see used as a possible bottom floor going forward. Give all this three more months, and absent any major announcements, that, I believe is where it is headed. And that would be a reasonable price.
    That said, I'd suggest long-term the future looks good. I went into that in the previous post so won't repeat myself as to why - read it from there. But there is one thing which in my rush I forgot to mention. At least I failed to take what I did say about it and continue the thought to where I ought have taken it. It involves those warrants.
    Both Echavarria as an individual and Yin through the holdings by his company Amaran Biotechnology have quite a few million dollars at stake with those warrants. To be profitable for them the price of SBOTF must be at or above the $1.35 strike price. Moreover, there needs to be at least some belief that a price above that can be sustained. Now, neither of these two gentlemen got mega-wealthy by allowing opportunity to profit fade away without at least some effort to make it work I their favor. I would therefore suggest that we all look at that $1.35 as perhaps something of a "floor" price for the stock, at least until the warrants are exercised and maybe the acquired stock then sold to capture the profit. To my mind, if they acquired stock were quickly sold it would indicate a lack of faith by Yin and Echavarria that the price would continue above that level and even rise short-term. But there are many reasons they may have based in individual circumstance that cold trigger a sale, so this isn't a hard and fast assumption.
    Whatever the action they take after exercise of the warrants, one thing is for sure - they want, I fact need, the price to remain above $1.35. They may take some action to see that this happens - what I don't know. But something positive. Seems to me Yin is in the best position to make that sort of move given his involvement with the company above and beyond being a basic investor.
    For example, there has been rumor for a long time about a possible outcome being SBOTF coming under a buyout proposition form some other Phara company. Well, why not Amaran as the buyer? Get that rumor (and I have not heard or seen ANYTHING even remotely suggesting that this is in play in any way) going and BAM! the stock price will jump. Or feed into the constant chatter about SBOTF finally getting an uplisting from the BB stocks and onto NASDAQ. Once again, do that and BAMBAM! you'll see a jump up. A ear ago this was being circulated as possible, quite quickly. Problem is they need a stock price of $5.00 r better to even consider it - and that ain't gonna happen under current circumstances for a long time. So, what to do? The board would have to declare a, say, 10-for-1 reverse split to hit that $5.00+ number. That would, or at least should, give a BAMBAMBAM! to the stock price. Doing something like that is expensive and quite involved, so maybe SBOTF isn't in a position to execute such a maneuver quite yet. But is Yin or Echavarria in position to provide funding for this? Easily if they see benefit.
    So there are two ore factors to consider as to the ling term potential for SBOTF: uplisting or buy out. And our two big boys here can perhaps make either happen at some point.
    As for me, as I said earlier, I always tend to follow the money. Yin and Echavaria know what is what and aren't casual fools with their investments. While it's no guarantee that this will pan out over time, it is to my mind a strong indicator that good things will prevail if you have the patience to wait it out.
    CONCLUSION:
    - There are many pieces that go into a valuation of SBOTF stock today. I have no crystal ball to show me the optimum entry or exit point. That you will have to decide for yourself. Is it $0.60? Or $1.05 Or $1.35? Or ______ (you fill in the number)?
    - There are two major players that think the potential for long-term profit exists. Do you believe they know what they are doing?
    - Will Publishers continue to use SBOTF as a launching vehicle to promote subscriptions to their publications?
    - Can SBOTF continue to develop and refine their primary mission of remaining the primary source of KLH to the Pharma industry? Can they get the land-based aquaculture of the Giant Keyhole Limpet fully developed and patented? And cn they continue to cut deals with other companies to supply the KLH they need, plus getting a concession to participate in some manner in the profits of any new drugs that could become approved and use KLH as one part of the formulation?

     

    These are the questions. Investors will get the answers in due time. Meanwhile, we wait.

     

    Disclosure: I currently have no position in SBOTF. I am long TSLA and GPRO. I wrote this comment myself and received no compensation for doing so from any entity. The material contained within was derived from sources believed to be reliable but cannot be guaranteed. This is not to be construed as a recommendation to buy, hold, or sell any security, but instead be used as information only. Each investor is required to do their own due diligence and come to a conclusion as to whether or not any security mentioned is suitable for them.
    5 Sep 2014, 08:13 AM Reply Like
  • ParaBellum16
    , contributor
    Comments (53) | Send Message
     
    Please don't refer to this recent action as a "Pump and Dump" scheme. It is not that at all. It is a Newsletter Publishers Promotion using Stellar as the teased company. Stellar is not involved in this in any way. A Pump and Dump ALWAYS involves the company and works to benefit the management and insiders. The company PAYS the Pumper for this sort of promotion. A Newsletter Publishers Promotions does nothing to help company officials but instead to geared to drive subscriptions to the Publisher for his newsletter. A WORLD of difference. To paint Stellar as a "Pump and Dump" is a terrible disservice to the company. Yes, I know - it LOOKS like a duck, SOUNDS like A duck, WALKS like a duck .. but in these instances IT ISN'T A DUCK. This is an important distinction for investors to make. Otherwise it can be very misleading as to the character of the company and the executives and board.
    6 Sep 2014, 01:58 AM Reply Like
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