GeoInvesting Weekly Premium Email and Call To Action Updates (May 4 – May 8)
Many of you know GeoInvesting for its work in short activism. We’ve outed 12 U.S. listed China based frauds and 22 U.S. pump and dump schemes. However, we also have no problem being activist’s on the long side when we think shareholders are getting the short end of the stick.
We started coverage on Sonic Foundry Inc (OOTC:SOFO) on March 30, 2020 at $3.70 due to its involvement in the remote video capture and conference industry. We also disclosed a long position in the stock. You can see our Reasons for Tracking (RFT) the stock here.
We believed that new leadership and COVID-19 could have a meaningfully positive effect on the company’s revenue growth, which has been anemic for several years. This belief was further reinforced after we took a deeper look into the company and its strong position in the higher education market segment.
That’s why on April 27, 2020, less than a month after the initiation of our coverage, we were surprised to see SOFO’s Board of Directors approve a buyout offer of $5.00 per share at a ~1x enterprise value to sales (EV/S), led by the Chairman of the Board. We wanted to let you know that we are seriously contemplating challenging this buyout offer, which management believes will close in the third quarter of 2020. We see our potential challenge as a very low risk/high reward opportunity, since the stock is selling at about $4.50.
Please let us know if you would be interested in joining us in this battle. We will keep you posted on whether or not we decide to aggressively pursue this initiative, along with our reasons that we believe justifies our actions.
The last time we took on a similar long activist role in a takeover scenario was in 2016, when we believed that a private equity’ s bid for a school bus manufacturer, Blue Bird Corporation (NASDAQ:BLBD), underpriced the true value of the company’s shares. We aggressively fought the buyout bid in the public domain, which eventually led to our story being covered in Barron’s and the company’s refusal of the offer. While our coverage was initiated when BLBD traded for $14 per share. While we closed out our own shares for a 28% gain, the stock eventually hit a high of $26.95 on September 14, 2018, an increase of 92%. As part of our long disclosure, we also bought BLBD warrants which we closed for a gain of 340%. You can see the full case study on Blue Bird here.
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Tracking Biotech Catalysts
Zynerba to release trial results of CBD treatment
Zynerba Pharmaceuticals, Inc. (NASDAQ:ZYNE) recently affirmed it plans to release results of two, phase II clinical trials testing Zygel (ZYN002) in autism before the end of June 2020. While both trial results should be catalysts to Zynerba shares, the timing of when the results will be released is curious.
In the CONNECT-FX trial, Zynerba is testing Zygel to treat 3- to 17-year-old autistic patients with Fragile X syndrome, a rare genetic developmental disability. SanaCurrents wrote on the CONNECT-FX trial in November 2018, when Zyernba was priced at $5.03 per share, expecting Zynerba would report results of the pivotal trial by October 2019. The company has delayed reporting the results for nine months. In the interim, Zynerba shares climbed to nearly $16 per share in 2019, based on a buoyant market for cannabidiol (CBD) treatments such as Zygel.
Last year, Zynerba started another phase II trial testing Zygel in patients with autism spectrum disorder (ASD), a broader population of autism patients.
Zynerba is scrubbing the data for both the ASD and Fragile X trials now. Though the company likely has had more time to prepare the Fragile X data, it plans to release the ASD data first. Why? One explanation would be Zynerba expects the Fragile X data will disappoint, so it is softening the fall with somewhat positive results from the less important ASD data. A bull explanation would be the company knows both results are strong and releasing the Fragile X data second will push the stock price higher after one bump already.
Either way, the data readouts are both “money trials” for Zynerba. While Zynerba’s CBD treatments always have been more pharmaceutical based than the broader market for marijuana and CBD stocks, investor enthusiasm for CBD has subsided. Zynerba probably can recover from presenting mediocre data next month, but it won’t be easy.
Zynerba closed at $7.77 per share on May 8.
SanaCurrents is a premium newsletter that has been offering its Premium service to GeoInvesting Members at a special rate. SanaCurrents assigns likelihoods of favorable FDA decisions or data releases (catalysts) surrounding biotech product development initiatives. Biotech expert Bill Langbein, along with his partner Philip Greyling, apply a host of qualitative and quantitative factors to support their rankings and their purchase of shares before dates of when FDA decisions or the release of important data. To date, SanaCurrents has written 64 reports, now archived at geoinvesting.com. You can go here to learn more about Sanacurrents and get access to the service for $7.99 for the first month.