Generex Biotechnology Corporation (OTC:GNBT) on a Highway to SubPennyLand
Today’s story is devoted to a debt-ridden penny stock that has been around for 17 years and has so far failed to take on a positive course towards financial stability. The stock in question is Generex Biotechnology Corporation (OTC:GNBT) and its abysmal fall on the charts is the main reason why investors should raise the alarm.
Yesterday, GNBT closed trade at $0.035 per share, down 12.50% from its previous close, on a volume of 4 million. Not only did the company continue to dig deeper on the charts, but it also hit a 3-year low, thus paving the way for ever more losses in the future. This development came hard on the heels of yet another debt financing agreement through issuance of convertible preferred stock, which, from a historical perspective, is hardly anything investors should be surprised by.
While there is nothing wrong with raising external capital in general, doing it for the thousandth time could raise doubts, especially if the company in question has incurred a total loss of almost $360 million throughout its existence. Indeed, this is the overall result of GNBT‘s business operations for the last 17 years. And there is more to it. The company claims to have a handful of product candidates in both pre-clinical and clinical development, which means that it has a long way to go before getting an FDA approval on any of them. The latter, in turn, implies more and more expenses in the future, which will eventually add up to the total loss mentioned above.
To satisfy its financial obligations, GNBT managers have been issuing new stock like crazy for quite a while now. What is more, the company’s strategy to meet its imminent cash needs is solely based on additional private placements of common stock, offerings of preferred stock, as well as convertible debt instruments.
Nevertheless, GNBT‘s dire financial state has not prevented its BoD from executing stock incentive plans at a breakneck speed. As of Oct. 31, the company’s management had already granted approx. 30 million shares to employees, directors, consultants and advisors. As a matter of fact, GNBT‘s BoD have spent almost $150 million (since inception) for general and administrative purposes, including salaries and other remuneration packages. By contrast, they have invested a little less than $133 million in research and development, i.e 12% less than the total payroll. In this respect, investors would expect CEO Mark A. Fletcher and his fellows to justify at least a portion of those labour costs by finally providing the FDA with a killer product candidate worthy of approval.
