Invo Bioscience Inc (OTCMKTS:IVOB) Goes Ballistic on FDA News
We’ve always maintained that any investment should be based on sufficient and up-to-date information about the company and the stock. Clearly, many people tend to disagree with us. Those people heard yesterday that Invo Bioscience Inc (OTCMKTS:IVOB)’s INVOcell device has been given an FDA approval and they sent the stock on quite a run. The press release and the supporting 8-K hit the wire around noon, but despite this, in a matter of a few short hours, IVOB managed to more than double its value. When the closing bell rang, it was sitting at $0.99 per share.
The people in question completely ignored the fact that IVOB hasn’t filed any financial reports for the last four years. But have they made a terrible mistake? Or is IVOB a one-in-a-million exception that is actually worth investing in despite the delinquency?
Well, the FDA clearance is massive news. Very few OTC companies manage to get this far and, as the press release insists on pointing out, the approval means that as much as 6.7 million couples with fertility problems in the US should soon have access to the INVOcell device.
The product itself has received quite a lot of positive coverage. It was approved for sale in Europe seven and a half years ago, and more recently, it has been looked into by numerous organizations, including the American Society for Reproductive Medicine. The common opinion is that the INVOcell method is cheaper and as effective as the traditional in vitro fertilization. Last year, The Economist even speculated on whether it could halve the cost of having a baby for couples who have problems conceiving.
All in all, the product seems to be backed up by some solid science and the FDA has finally come around to admit it. Investors are absolutely wild with excitement and some of them appear to be convinced that the approval has turned IVOB into a buyout target for the big biotech companies.
While this might as well turn out to be the case, you mustn’t forget that the lack of regulatory filings poses more than a few risks.
If you’re investing right now, you’re putting your money on the line without having any idea what the balance sheet looks like. You also have no idea what the market cap is because, of course, you have no current information on the share structure. You have no clue when the delinquency is expected to be cured because the management team seem to be evading the question in their press releases.
Basically, the only thing you can base your investment decision on is the news from yesterday and the 10-Q for the third quarter of 2011. As we mentioned several months ago, the latter is not particularly encouraging. Not least because it says that four years ago IVOB had quite a lot of toxic debt on its books. Some of it was convertible at fixed prices that can go to as little as $0.03 per share while the rest carried conversion provisions which allowed for a 50% discount to the market price.
