Biofrontera's S-1 Filing Created A False Fear But Also Solidified A True Opportunity For Massive Squeeze To $40 (Or More)

Summary

• On December 21, news of an "S-1" Biofrontera Form created confusion for many investors who mistakenly assumed it represented an offering of new shares at a price of $6.67.
• Fact: Though an S-1 was indeed filed, there is no new offering based on any information shared by the company.
• The inaccurate information posted by traders has only served to create a floor in share price, and the temporary dip makes the case for a massive short squeeze even stronger.

Our previous article on Biofrontera (BFRI) made the case for a massive short squeeze to at least $40 by December 31, 2021.  This thesis was constructed based on both fundamental and technical factors, including the fact that the company has 2 approved FDA products, projected financial growth, and a whole host of other factors (small float, astronomical borrowing cost, extremely high short interest) which provided a "perfect storm" opportunity for a short squeeze.  

Since then, and specifically during after hours on December 21st, many traders began circulating a BFRI S-1 Filing, in many cases making the false claim that it represented a direct offering of shares.  In  other cases, there was false information being shared that the company was desperate for cash.  The reality is that the S-1 Filing is a registration statement filed with the SEC which affirms only the potential for a recent institutional buyer who acquired both warrants and shares to be made available to the public float at some future date.  At the moment, however, there is simply no impact to the current shareholders as a result of this S-1 Filing.  Fundamentally, nothing has changed.  A couple of points that need elaboration and reinforcement: 1) There is no share offering from the company, and 2) Biofrontera still owns approximately 53.1% of the float. 

Let's assume the worst case scenario and conclude that there may be additional shares added to the float at some date in the future.  Even in this scenario, we believe that the total number of outstanding shares would be insignificant to impact the high conviction thesis of BFRI being on the pathway for a massive short squeeze.  In fact, the short interest only continues to get higher, the borrowing cost only continues to get more expensive, and the misinterpretation of the S-1 Filing now creates an even greater appetite among the shareholder base to hold their shares, given that it has created a new temporary floor on and a dip in share price.  

We continue to believe that no other equity provides as much potential for a massive short squeeze opportunity as BFRI.  Just as the Roth analyst price target of $20 has not changed as a result of the S-1 Filing, our squeeze target of $40+ has not changed, either.  Though volatility may ensue, we anticipate that the massive squeeze will continue as we approach December 31, 2021.