Traders Anticipating Move from Catabasis Pharmaceuticals Inc. (NASDAQ:CATB)

Catabasis Pharmaceuticals Inc. (NASDAQ:CATB)

At 11:45 AM EST, CATB shares are up 75% and trading at $2.32. The reported average daily volume for biotech firm Catabasis Pharmaceuticals, Inc. (NASDAQ:CATB) is 173,000 shares. Today, before lunch, over 36 million shares have traded hands. That equates to a pro-rata relative volume of 173 times the normal average daily volume. Catabasis has several drugs in the pipeline as we will show below, however there is no announcement of clinical trial data or of any corporate activities that normally accompany such a volume increase. The company is expected to provide Q4 and full year financial results on March 16, 2017.

The catalyst for the dramatic increase in volume might be a positive reception to an investor presentation given by Catabasis at Cowan and Company’s 37th Annual Health Care Conference. That presentation was given on March 8th and the shares have risen in the past two days on strong volumes.

Despite trading over 70% below their 52-week high, of the four analysts that cover Catabasis Pharmaceuticals, Inc. (NASDAQ:CATB), three assign CATB shares a rating of “Strong Buy” – one is neutral on the stock. CATB has been volatile over the last year. It has reached a high of $7.89 and a low of $1.08. Given the recent price action, traders may be betting that the March 16th financials may help propel CATB back towards their 52-week highs. Why would they believe that? It is possible the Cowan and Company presentation planted those seeds of belief. Here is a screen shot of their pipeline as presented to the conference:

 

The investor presentation provided Catabasis’ anticipation of the following activity in 2017:

  • JCI Insight will publish preclinical results for edasalonexent.
  • The Journal of Clinical Pharmacology will be publishing results of edasalonextent’s Phase 1 trial.
  • CAT-5571 preclinical results will be published in the Journal of Medical Chemistry.
  • Catabasis will announce top-line results from Part B of the MoveDMD trial.

Keep an eye out for StockNewsUnion to update this developing story after Q4 financial results are announced by Catabasis Pharmaceuticals Inc. (NASDAQ:CATB) next week. In the meantime, keep an eye on CATB as it could offer some real opportunities at these volumes and volatilities for a skilled trader.

3/10/2017
Ticker Symbol CATB
Last Price a/o 11:32 AM EST  $                      2.18
Average Volume                    605,290
Market Cap (mlns)  $                    25.66
Sales (mlns) $0.00
Shares Outstanding (mlns) 19.29
Share Float (mlns) 16.37
Shortable Yes
Optionable No
Inside Ownership 4.20%
Short Float 3.58%
Short Interest Ratio 0.97
Quarterly Return -64.15%
YTD Return -63.16%
Year Return -80.92%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy. 

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

SNAP Inc. (NYSE:SNAP) Valuations Need Their User Demos to Grow Up

SNAP Inc. (NYSE:SNAP)

To say that the recent IPO of Snap Inc. (NYSE:SNAP) has received attention from the financial media is a bit like saying that President Trump’s tweets sometimes generate discussion amongst the press. Snap Inc. is the third social media IPO, after FaceBook and Twitter, to generate such an abundance of hype that it demands an answer to the question – is SNAP worth the price? This is a question with a binary outcome – each expert’s opinion has a 50/50 chance of being right. Most experts have come to the conclusion that it does not citing current valuations, daily average user numbers, and growth rates of just about every imaginable metric. We agree that Snap Inc. (SNAP) is a reach at these prices. Did I say “a reach”? Let’s be clear – it’s more like one of Elon Musk’s moon shots. We’ll review some of the valuation and growth data then we’ll bring some common sense into the discussion.

First, thanks to FinViz.com, this is what the shareholders of Snap Inc. (NYSE:SNAP) hope the stock will look like in a few years:

http://elite.finviz.com/publish/030517/FBm164511264i.png

This above monthly chart is for FaceBook. Its current valuation is over $395 Billion.

Now let’s look at Twitter. This is what Snap Inc. (NYSE:SNAP) shareholders hope the stock performance will not look like in a few years.

http://elite.finviz.com/publish/030517/TWTRm164601197i.png

Twitter’s current valuation is $11.5 billion. It was worth $40 billion at the end of 2013. Twitter hit its all-time high the second month it was trading and is now trading almost 80% below that mark.

After Friday, Snap Inc. (NYSE:SNAP) has a market capitalization of over $28 billion. That market cap means that SNAP is trading at over 60 times its 2016 revenues and over 32 times projected 2017 revenues. In 2015, Snap Inc reported a loss of $325 million in daily cashflow that expanded to a loss of $677 million in 2016. However, as most financial professionals understand, growth usually kills all concerns about oversized valuations.

In Q2 2016 Snapchat had 65% growth in their daily average user base that shrank to 40% in Q4 of last year. That drop in growth figures is what worries most investors that SNAP may be more like TWTR than FB. The model that was part of the SNAP roadshow put 2019 active daily average users at 400 million. By the end of 2016, SNAP had about 50% more daily active users than at the end of 2015. We know from Twitter’s experience that growth rates often have a ceiling and there is nothing to suggest that SnapChat is immune to that. Whether it will be immune to Instagram’s efforts to challenge it in its own space is an open question and one that only the market can tell us after the outcome if relatively clear.

Users of SnapChat generate ad sales, which are responsible for over 95% of the revenue. The issue that advertisers have is that the 10-second video ads can be swiped away by the person viewing the user’s story. But how does SnapChat compare to Instagram – who they will absolutely be competing with in terms of ad dollars? Advertising Age related that a Nike ad buy got 66,000 views on SnapChat. But on Instagram the same ad got over 800,000 views. Instagram has a larger user base – double that of SnapChat. But in this single example, Instagram outperformed for their advertiser by a factor of 12!

Snap Inc. (NYSE:SNAP) likes to point out that their user growth metrics outpace either FaceBook or Twitter. True enough. However it is also true that the barrier to adoption of a new social media platform has lowered due to the acceptance of those same social media channels. As younger generations become a larger segment of the social media universe, adoption barriers lower as the younger generation are eager to be “first-adopters”.

And that is really where we come down against buying SNAP at these levels. It is easy to make the case that in 5, 10, or 20 years SnapChat will be a mature company with a massive user baser generating huge revenues. However, in our opinion, investors will have to wait until the younger generation grows into the demographic that actually has some disposable income to spend on the goods or services that SnapChat will be advertising. A quick survey of my friends, family, and their kids found that over 90% of the active SnapChat users had no income. Eventually they will and that will be the tipping point at which shares of Snap Inc. (NYSE:SNAP) might become more attractive.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20-year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

Applied Optoelectronics, Inc. (NASDAQ:AAOI) Completes the Turn

Applied Optoelectronics, Inc. (NASDAQ:AAOI)

Applied Optoelectronics, Inc. (NASDAQ:AAOI) started out as a manufacturer and supplier of products to the cable television market. In 2013 the company took a deliberate turn to transform itself into a producer of products that market to data centers. Any time a company makes a strategic turn there is risk, but it appears that three years later the results are in – and Applied Optoelectronics came out a winner.

In 2014 Applied Optoelectronics, Inc. (NASDAQ:AAOI) reported total revenue growth at 66% over 2013 revenues and attributed that growth to their rapid expansion into the data center optical market. That growth was impressive enough to get the firm the 374th spot in the Deloitte’s 2014 Technology Fast 500. The growth continued in 2015 as Total Revenues grew 46% and GAAP Net Income more than doubled the 2014 figure.

Yesterday Applied Optoelectronics, Inc. (NASDAQ:AAOI) posted their full-year 2016 results. They did not disappoint – again. The Sugarland, TX company reported 2016 revenues up 37% over 2015. GAAP net income increased to $31.2 million, or $1.76 per diluted share, compared with net income of $10.8 million, or $0.65 per diluted share in 2015.

While AAOI shares gained less than 1% during Thursday’s regular session, the market responded to the earnings release by sending AAOI up over 12% in after-market trading to their highest-ever levels ($42.20) on moderate volumes. The growth in the stock has been jaw-dropping for a $600 million company. AAOI threatened to break below $8 in May of 2016 and today is sitting above $40, that is 500% growth in 1.5 years in a highly competitive industry that includes investor darlings such as Lumentum (LITE), Oclaro (OCLR), and ARRIS International (ARRS).

Throughout the transformation, one man remained at the helm. Dr. Thompson Lin is the founder, CEO, and Chairman of the Board of Applied Optoelectronics, Inc. (NASDAQ:AAOI). He founded the firm in 1997 after receiving a Ph.D. in Electrical Engineering from the University of Missouri. Dr. Lin has been awarded over ten patents and has authored over 200 technical papers. While those are impressive achievements, there is little doubt that his greatest achievement has been the skilled stewardship of Applied Optoelectronics, Inc. (NASDAQ:AAOI) through a highly competitive global market.

2/23/2017
Ticker Symbol AAOI
Last Price a/o 7:59 PM EST  $                    41.80
Average Volume                    511,380
Market Cap (mlns)  $                  619.00
Sales (mlns) $228.80
Shares Outstanding (mlns) 16.52
Share Float (mlns) 16.35
Shortable Yes
Optionable Yes
Inside Ownership 2.40%
Short Float 12.75%
Short Interest Ratio 4.08
Quarterly Return 42.96%
YTD Return 59.85%
Year Return 134.65%

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Marc has a degree in economics and a MSc. in Finance. Over his 20 year career, Marc has worked for global investment firms in Europe and the United States as an analyst, fund manager, and consultant.

 

Polarityte Inc. (NASD:COOL) A History and Direction Like Few Others

Polarityte Inc. (NASD:COOL)

In December of 2016, Salt Lake City, UT-based Polarityte Inc. (NASDAQ:COOL) became a wholly owned subsidiary of Plainfield, NJ-based Majesco Entertainment Co. It was unlike any merger that most had ever heard of. Polarityte, Inc. was, and continues to be, a biotechnology firm pursuing the holy grail of reconstructive surgery – regenerative tissues. Majesco was a video game developer with a 25-year history that was once worth hundreds of millions of dollars. How did two firms with vastly different business models come to be a single entity?

The Background

In 2016, Majesco was a video game developer who had lost consumers, money, and investor confidence. Majesco’s annual revenues fell from $130 million in 2012 to $6.7 million in 2015. In the 4th quarter of 2015, revenues were $3.5 million, but by the 4th quarter of 2016 that number had trended down to $0.59 million and EPS had dropped from a $0.24 loss to a wider $0.66 EPS loss.

Majesco Entertainment Inc. took action to preserve the corporate entity. They merged the two firms. In December of 2016, Majesco issued preferred stock which, when converted, would represent approximately 50% of the issued and outstanding common stock of Majesco on a fully diluted basis. Majesco also entered into stock purchase agreements for the purchase of 750,000 shares of common stock for $2,250,000.

COOL shares gapped up and more than doubled on the news – from just over $3 to over $6 on heavy volumes. However, COOL shares slid back into the $3 handle within days. Then on January 10, 2017 a name change was announced – Majesco Entertainment would now be Polarityte Inc. (NASDAQ:COOL). The name now matched the change in the firm’s business model.

“Changing the company’s name reflects our current business focus following the December 1, 2016 definitive merger agreement with PolarityTE™, Inc.,” said Denver Lough MD, PhD, Chairman and CEO.

The Results

While shares of Polarityte Inc. (NASDAQ:COOL) spiked then retreated after the merger, COOL shares have been the market’s darling since. In the last quarter shares are up 88% and have almost double YTD. On December 7, 2017, Polarityte Inc. (NASDAQ:COOL) shares were trading just over $3, but the last two days have seen COOL shares trade over $5 on heavy volumes.

Polarityte Inc. (NASDAQ:COOL) has not stood still after the merger. They are aggressively pursuing development of the regenerative medicine and tissue engineering platform developed and patented by Denver Lough MD, PhD. To that end, they continue to name high-profile industry names to their board. They quickly brought in Dr. Neumeister – Professor & Chairman of the Department of Surgery and The Elvin G. Zook Endowed Chair in Plastic Surgery at Southern Illinois University School of Medicine in Springfield, IL. Most recently the board welcomed Dr. Mogford. Dr Mogford has extensive experience in regenerative medicine and wound healing and oversees research strategy as Vice Chancellor for Research across the entire Texas A&M University System, while serving as Deputy Director of the Defense Sciences Office (DSO) within the Defense Advanced Research Projects Agency (DARPA) in the U.S. Department of Defense.

Polarityte Inc. (NASDAQ:COOL) has a corporate history that is decidedly unusual, but the company’s new direction could wind up change reconstructive surgery in a seismic manner. This is definitely one to keep your eyes on.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

About the author: Steve Clark is a 23 year Wall St professional with stints in M&A, risk management, and algorithm trading.

 

Dry Ships Inc. (Nasdaq:DRYS) Don’t Try This at Home Kids

Dry Ships Inc. (Nasdaq:DRYS)

[This is an updated version of a report we published on February 1, 2017]

Dry Ships Inc. (Nasdaq:DRYS) has it all – an intriguing Chairman, thrilling price and volume action, and industry commentary that would generously be classified as cautious. The company trades on the Nasdaq under the ticker DRYS and has been dominating trader chat rooms for several months. To add to the intrigue, rumors persist that Kalani no longer owns any of the shares it received in the January transaction and Economou, Chairman of Dry Ships Inc. (Nasdaq:DRYS), has used a financing scheme that enriches himself without risking any of his own funds.

An investor that purchased DRYS shares five years ago, Feb. 1, 2012, would have seen their investment, adjusting for reverse splits and dilution, lose 99.9876% of its value. So how could such a company survive not only de-listing but also investor confidence? The de-listing question is readily answered by multiple reverse stock splits and increased borrowing that some people claim serves no purpose other than to keep a failed company afloat. The company is 99.8% below its 52-week high and, according to its latest quarterly report, is burning cash at twice the rate of the previous quarter. Lastly, reported 2016 revenues were about 5.3% of their 2015 levels. To be fair – Dry Ships Inc. (Nasdaq:DRYS) sold off a lot of assets to reduce/restructure their debt load. But the story around Dry Ships Inc. (Nasdaq:DRYS) and its chairman is intriguing.

On December 1 of 2016 George Economou purchased most of Dry Ships Inc. (Nasdaq:DRYS) bank debt. Eleven days later, Dry Ships announced the successful completion of a $100 million equity raise in exchange for convertible preferred shares and warrants. On December 15, Dry Ships received an increase in their credit line from Economou to $200 million after the company repaid over $30 million. At the same time Economou lowered his firm’s management fees in return for 30% of all future realized asset value increases. To continue to add to the complexity, all within less than a month, Dry Ships Inc. (Nasdaq:DRYS) entered into a financing agreement with mysterious Kalani Investments for another $200 million in an equity placement. So, what did Dry Ships do with their funding? They bought ships from a company reportedly controlled by George Economou – Chairman of Dry Ships. And in the middle of all of this, DRYS outstanding shares grew from approximately 1.1 million to over 107.9 million in less than two months. On February 17, 2017 the company released news (and interestingly made specific mention that Kalani and Dry Ships have no affiliation) of a further $200 million Kalani investment in return for shares of DRYS common stock that could take place over the next two years.

Throughout all of this, Dry Ships has been extensively commented on in financial media. Some of the article headlines include the titles “DryShips Stock: The Worst Dollar You’ll Ever Spend” and “George Economou Is The Main Reason To Sell Dryships” – both on SeekingAlpha.com. The MotleyFool.com published an article with the headline “Why DryShips’ Shares Vacillate So Much and How It’s CEO is Hanging Investors Out to Dry”. To be fair, articles on more populist financial media websites are purported to be no less damning if one can read between the lines like a professional trader.

Still, DRYS stock has been the big topic in trader chat rooms. The increased volume and attention have led to massive liquidity that few, if any, stocks of DRYS capitalization enjoy. Since Mr. Economou’s entrance, DRYS has averaged over 13.5 million shares traded daily. In September and October of 2017, prior to Mr. Economou’s entrance, less than 8,000 shares traded hands on average. The ending to this story has yet to be written. Mr Economou may come off as a genius that schooled the more conventional observers of his actions and scoffed. Or the last one out of the DRYS stock pool may be left with nothing more than the thrill of a ride that few have seen before.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

Airborne Wireless Networks (OTCMKTS: ABWN) Poised to Disrupt?

The explosion of the internet age saw hundreds of billions of dollars spent to lay down wire and fiber-optic cables that would carry more information in an hour than had been created in all of man’s existence. Cell towers were erected that allowed electronic voice, and later data, communications to travel through the air. Iridium Communications (previously known as Iridium Satellite LLC) was the first to attempt to bring the information superhighway to the entire world. They launched a constellation of low-orbit satellites that allow their users to access digital voice/data communications anywhere in the world – at an expense that most find prohibitive. Now the world has Airborne Wireless Networks (OTCMKTS: ABWN). A company that has a intriguing, patented approach to global voice/data communications at a fraction of the current cost by utilizing airplanes instead of costly satellites.

Simi Valley, CA-based Airborne Wireless wants to fill the geographic “black holes” in the world’s digital communications by linking commercial aircraft in flight.  Each aircraft participating in the network acts as an airborne repeater or router, sending and receiving broadband signals from one aircraft to the next and creating a digital superhighway in the sky.  Unlike Iridium Communications, Airborne Wireless Networks (OTCMKTS: ABWN) will not market to end-users, it will instead sell access to its network to internet service providers and telephone companies. ABWN has started marketing itself on Fox Business News.

The efficiency and convenience of such a network is arguably unparalleled when compared to existing alternatives. Oil rigs, outdoor enthusiasts, or countries that do not enjoy a digital infrastructure comparable to the developed words’ – all could now have equal access to the internet.

In 1998, during the pioneering days of wireless data-connectivity, Airborne Wireless Networks (OTCMKTS: ABWN) inventor submitted a patent application to the US patent and trademark office, and on September 4, 2001, US patent number US 6,285,878 B1 was granted. A few days later an event occurred which changed the airline industry and which would delay development of this disruptive technology for years.

Fast-forward to 2016, Airborne Wireless Networks (OTCMKTS: ABWN)acquired the patent and months later announced that it received an FAA Project Number for its Supplemental Type Certificate (STC) application to install a Broadband Transceiver System on Boeing 757-200 aircraft. In December of 2016, ABWN entered into an agreement with Electric Lightwave Holdings, Inc. The agreement allows the Infinitus Super Highway™, once implemented, to reach the end users. Without a ground link, users would have no way to access the ABWN network.

In January of 2017, Airborne Wireless Networks (OTCMKTS: ABWN) and Air Lease Corporation (NYSE: AL) announced they entered into a Memorandum of Understanding with regards to a strategic marketing partnership for Airborne Wireless Network’s (OTCMKTS: ABWN) proposed broadband wireless networks. Los Angeles, CA-based Air Lease Corporation owns 240 aircraft, including 181 single-aisle narrow-body jet aircraft, 40 twin-aisle widebody jet aircraft, and 19 turboprop aircraft. Under the terms of the agreement, Air Lease Corporation will act as the exclusive marketing agent and use its extensive network of airline customers to market the “Infinitus Super Highway™” to multiple airline customers throughout the world.

Investors seem to be responding positively to Airborne Wireless’ concept and progress. A year ago, AWBN (OTCQB: ABWN) was trading at $0.25, but closed Friday, February, 3, 2017, at $2.17 with a market cap over $150 million and over one million shares traded. Should Airborne Wireless Networks (OTCMKTS: ABWN) continue to successfully execute its vision, it will forever change society. No longer will people or businesses have to factor in internet access availability when deciding where to locate. That makes it a company with a potentially high disruption factor not only in the sense of technology, but also how we function as a society.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.

The Drama That is Dry Ships Inc. (Nasdaq: DRYS)

Dry Ships Inc. – Nasdaq: DRYS

Dry Ships Inc. has it all – an intriguing Chairman, thrilling price and volume action, and industry commentary that would generously be considered as cautious. The company trades on the Nasdaq under the ticker DRYS and is dominating trader chat rooms. The catalyst to the latest increase in trading volume is related to news that Dry Ships raised $200 million in an equity sale to Kalani Investments – a BVI-based firm with little transparency. To add to the intrigue, rumors persist that Kalani no longer owns any of the shares it received in the transaction and George Economou, Chairman of Dry Ships Inc., has used a financing scheme that enriches himself without risking any of his own funds.

An investor that purchased DRY shares five years ago, Feb. 1, 2012, would have seen their investment, adjusting for reverse splits and dilution, lose 99.9876% of its value. So how could such a company survive not only de-listing but also investor confidence? The de-listing question is readily answered by multiple reverse stock splits and increased borrowing that some people claim serves no purpose other than to keep a failed company afloat.

On December 1, of 2016 George Economou purchased most of Dry Ships bank debt. Eleven days later, Dry Ships announced the successful completion of a $100 million equity raise in exchange for convertible preferred shares and warrants. On December 15, Dry Ships received an increase in their credit line from Economou to $200 million after the company repaid over $30 million. At the same time Economou lowered his firm’s management fees in return for 30% of all future realized asset value increases. To continue to add to the complexity, all within less than a month, Dry Ships entered into a financing agreement with mysterious Kalani Investments for another $200 million in an equity placement. So, what did Dry Ships do with their funding? They bought ships from a company reportedly controlled by George Economou – Chairman of Dry Ships. Then the unconfirmed whispers started that Kalani had sold all their shares to the public, at a small profit, and now hold no equity in DRYS. And in the middle of all of this, DRYS outstanding shares grew from approximately 1.1 million to over 107.9 million in less than two months then went through an 8:1 reverse split. Some people claim that Economou’s financing scheme basically used shareholder funds to buy ships from a company he controls with equity funding from a debt-laden and financially unsustainable company he also controls (Dry Ships Inc.).

Throughout all of this, Dry Ships activity was extensively commented on in the financial media. Some of the article headlines included “DryShips Stock: The Worst Dollar You’ll Ever Spend” and “George Economou Is The Main Reason To Sell Dryships” – both on SeekingAlpha.com. The MotleyFool.com published an article with the headline “Why DryShips’ Shares Vacillate So Much and How It’s CEO is Hanging Investors Out to Dry”. To be fair, articles on more populist financial media websites are purported to be no less damning if one can read between the lines like a professional trader.

Still, DRYS stock has been the big topic in trader chat rooms. The increased volume and attention have led to massive liquidity that few, if any, stocks of DRYS capitalization enjoy. The ending to this story has yet to be written. Mr Economou may come off as a genius that schooled the more conventional observers of his actions and scoffed. Or the last one out of the DRYS stock pool may be left with nothing more than the thrill of a ride that few have seen before.

I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 96 hours. All information, or data, is provided with no guarantees of accuracy.


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