Generex Biotechnology Corporation (OTCMKTS:GNBT) Comes Under the Spotlight Once Again
Positive PR around Generex Biotechnology Corporation (OTCMKTS:GNBT) has been plentiful over the last couple of months. The company is now focused on getting the AE37 breast cancer vaccine on the market and if the announcements are to be believed, things seem to be going along nicely.
In GNBT‘s own words, the drug is currently in the later stages of the Phase II trials and so far, they have seen some encouraging results. Yesterday, about half an hour before the opening bell, they announced that they have collected some data from the latest trials and have sent it to be analyzed. According to the press release, GNBT should have some preliminary results by the end of the month. On the whole, things seem to be looking good.
Probably that’s why, the ticker went through some intense trading throughout the day. Six and a half hours were enough for GNBT to jump up by nearly 20% while shifting more than 14 million shares. It’s clear that the general sentiment from investors seem positive at the moment, but, as is often the case, the duration of the current run remains questionable. And there are a few things that might stop it.
For one, if you take the time to dig a bit further, you’ll see that not all of the people are quite happy with the way things are going. On December 2, a Seeking Alpha contributor called Thomas Barnard (who also says that he’s been a long-term shareholder) wrote an article which expressed his opinion about the company. It seems that while he is a fan of the technology, he doesn’t seem particularly fond of the management team. Mr. Barnard is particularly cross with the fact that the Board of Directors’ recently decided to issue themselves and the executive officers quite a lot of options which can be turned into common stock at $0.001 per share.
You can have a look through his article and decide for yourself whether his arguments have any merit, but we should point out that if the options get exercised, the underlying stock will inevitably affect the shareholders. Who, by the way, are becoming impatient.
If you go through the message boards, you’ll see that there are quite a lot of people who are not at all impressed with the latest press releases. In fact, a large portion of them think that the announcements are nothing more than an insider enrichment vehicle.
Truth be told, there are a few things to make the stockholders unhappy. For one, the company has been along for quite some time now, but so far, the management team has failed to secure a consistent source of revenues.
The dilution has also been significant – if you compare the latest 10-Q covering the quarter ended October 31, 2013 to the one for the corresponding period of 2012, you’ll see that nearly 250 million new shares saw the light of day in just twelve months.
And speaking of the 10-Q, we should also mention that GNBT‘s balance sheet leaves a lot to be desired. Here’s a quick summary of the most important figures:
- cash: $1 million
- current assets: $1.1 million
- quarterly operating loss: $1.4 million
- accumulated deficit: $367 million
In GNBT‘s own words, they will need some additional financing if they are to continue the development of the cancer vaccine. Which, by the way, also has to go through the Phase III trials.
That’s why, although the recent press releases suggest that the company is moving forward, there are still plenty of things that could put a spanner in the works. Evaluating the risks of a potential investment and doing a lot of due diligence is, as always, absolutely essential.
GNBT registered a green session yesterday, but it seems that other tickers weren’t quite so lucky. Tiger Oil and Energy Inc (OTCMKTS:TGRO), for example, took a heavy blow and wiped out more than 40% of its value after the $2.5 million pump stopped working. The promotion for US Energy Initiatives Corp Inc (OTCMKTS:USEI) also brought nothing but tears to the eyes of investors. The ticker dropped by no less than 23% after just two days of touting.