Stellar Biotechnologies: We've Seen The Pump, Now Here Comes The Dump

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The GeoTeam


  • We believe Stellar Biotechnologies' share price to be a product of a well-timed promotional campaign.
  • SBOTF's share count has risen 88.2% in three short years, and the September 2013 PIPE was done at a fully diluted share price of $0.3415/share. (sourced below).
  • The company appears to be operating far below its capacity, and has reported net losses of ($14.8M), ($5.1M), and ($3.5M) for the past three years. (source 3).
  • Promotions have touted the company's former agreement with Sigma Aldrich, but we've found that this agreement had expired in 2013.
  • SBOTF's biggest competitor, BioSyn, established in 1984, claims to be able to produce far more than 1,500 grams/year. (SBOTF's current capacity).

Stellar Biotechnologies (SBOTF) has been an intriguing story these last two months.

We've found three things about Stellar Biotechnologies to be concerned with right off the bat. These items, combined with the results of further due diligence, lead us to believe that Stellar will make its way back to $0.70 and resume its descent downward from there.

First, we've found a promotional campaign that we believe to be the cause of the company's stock price moving up in rapid fashion without material news or fundamentals to back it up. We've found third-parties that have issued questionable campaigns that are touting SBOTF, and these promotions have made some robust claims that we believe they can't back up - including, at one point, commenting that SBOTF would list on the Nasdaq "as soon as August 31, 2014."

Second, we will shine light on exaggerations made by these promotions about future operational expansion, which we view as unnecessary and a non-issue due to Stellar's already anemic history of production (sourced below). In addition, the company itself admits that it does not know if it is economically feasible to expand at this stage in its growth. We question why the company would think about expanding when we believe it to be operating far under capacity and production appears to be falling. Our conversations with BioSyn, a 30+ year veteran in the Keyhole Limpet Hemocyanin ("KLH") niche, confirm to us that Stellar's capabilities are nowhere near as robust as this competitor. Stellar's own 20-F from 2013 states that it produced under 50g of KLH for 2013, representing less than 4% of the company's 1,500g capacity. Stellar's V.P. of Corporate Development & Communications, Mark McPartland confirmed that the company was operating at far less than capacity, and had never operated over 10% capacity.

Finally, we question the

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GeoInvesting has worked diligently over the last decade to understand and benefit from working in areas that the Wall Street “crowd” has avoided – namely, microcap stocks. This niche of the market, while mostly ignored by analysts and financial media, is still often quietly invested in by many well-known billionaires. We apply our own deep-dive analysis in the space to find pockets of information arbitrage and unnoticed opportunities that have acted as the backbone for our investing success for over a decade. Unlike some investment banks and sell-side analysts, we don’t get paid by companies to write about them. --Armed with over a dozen analysts and a team of on the ground due diligence experts led by Maj Soueidan’s three decades of full-time investing experience, we look for high-impact idea generation. If you are looking to broaden your knowledge of investing, GeoInvesting can help with actionable insights on a wide array of stocks. -- Since GeoInvesting’s inception in 2007, we’ve been helping investors understand companies better by interviewing management teams, dissecting conference calls, interacting with our wide network of investors and scouring financial documents for hidden clues. GeoInvesting provides quick, concise and efficient research instead hundreds of pages of meaningless boilerplate jargon to pour through. You will no longer have to sift through these documents to find the most relevant aspects of a company’s operations, results and guidance – that’s our promise. --Sign up today and start to get: >Education on investing, both financial and psychological>Actionable Alerts>Exclusive Research>Trading Ideas>GeoTeam Positions>Access to the GeoTeam through our exclusive chatroom.--See GeoInvesting Micro Insights on Seeking Alpha Marketplace--About Maj Soueidan, co-Founder GeoInvestingMaj Soueidan is a full-time investor of 30 years. He co-founded GeoInvesting to bring institutional quality investment research to the individual investor and help broaden the awareness of the opportunities that exist in the inefficient micro-cap universe. In addition to educating investors on winning equity strategies, Mr. Soueidan has been on a mission to protect investors from fraud and pump and dump schemes. He introduced the “China fraud” to Geoinvesting and through his research process, identified dozens of U.S. listed China stocks he concluded were frauds, so that the Geoinvesting team could perform exhaustive on-the-ground due diligence research on them, including Puda Coal and Yuhe Intl. -- Maj works with and manages the GeoInvesting Team on a daily basis to increase its investment opportunity pipeline and heighten GeoInvesting’s awareness in the financial markets to intensify its market influence. He stresses the concept of “information arbitrage” in an era where information overload has actually made it more difficult for investors to locate profitable information. An information arbitrage exists when a disconnect between stock prices and available public information on a company is noticeable, and monetarily worth pursuing. ----------------------Other Publications:SanaCurrentsGeoInvesting has partnered with Bill Langbein of Sanacurrents to explore biotech opportunities through the publication of sentiment reports.--Before founding SanaCurrents, William (Bill) Langbein spent more than 20 years as a life science business journalist, with stops at California Medicine, In Vivo and Reuters Health. During that time, he wrote on genomic discoveries, the transition of the pharmaceutical companies to rely more on biologics, and the dawn of precision medicine, through which most drug developers came to recognize a one-drug-for-all approach would no longer work. --Because of the inherent volatility of biopharma and medical devices, small companies typically fly under the radar of investors. The emergence of precision medicine, however, reduces the volatility of small companies and increases the potential for strong returns. SanaCurrents was founded to identify the undervalued therapies that would benefit patients and investors the most. Find out more about SanaCurrents here -

Disclosure: The author is short SBOTF. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it. The author has no business relationship with any company whose stock is mentioned in this article.

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