Amarantus Bioscience, Inc. (OTC:AMBS) Slows Its Roll

After exploding on the market in three consecutive sessions, yesterday Amarantus Bioscience, Inc. (OTC:AMBS) cooled down and closed nearly 13% down. The stock is still latched to the top three most heavily traded OTC stocks and generated a volume recently exceeded only by the day AMBS dropped 30% in late December.

The heavy trading activity yesterday didn’t help AMBS go up in price, on the contrary. It seems the days when the stock generates the most share volume are the days when the price slips down, indicating heavy selling. AMBS has issued various convertible notes as settlement of debt or as a means of financing and over time those notes have piled up to a disturbing amount. A detailed list of the notes and the conversion prices offered can be found in the company’s latest 10-Q report. Almost all notes were issued at a great discount from an averaged lowest price over a period of time.

The current high price of the stock and the upwards chart movement may make it look like a good time to get in but traders should be very aware of the millions of shares noteholders may choose to dispose of at any time. Those would all be shares obtained at a great discount and sold to regular investors at the current prices.

The same 10-Q filing contains information on AMBS‘s virtually nonexistent financial reserves. As of September 2012 the company had the following:

• $580 in cash
• $4.6 million in current liabilities
• $0.5 million net loss for fiscal Q3

AMBS must be betting really big on their participation in the OneMedForum next Tuesday. On that day they are expected to unveil the test results for their MANF protein – the company’s biggest claim to fame. This will probably be a big make or break point for the company. A strong statement proving the successful performance of their product, backed up by a sufficient number of experts or institutions, may incite sufficient large investor interest and help AMBS push into clinical trials. On the other hand, more vague promises and muffled praise for MANF will probably do the company a great disservice.

An additional fact to keep in mind is that less than 3 months ago, before the hype about MANF results and performance really picked up, AMBS stock went for under $0.01 per share. Traders should keep in mind that small biotech companies may offer opportunities for a breakthrough at low prices but at the same time, they may also end up stuck in a loop of accumulating debt.