No Air of Festivity For Bio Nitrogen Corporation (PINK:BION)

Bio Nitrogen Corporation (PINK:BION) turned out to be one of the biggest losers during the last market session for 2012 shortly after announcing plans to start building its first ever urea producing plant. Was it a surprising development or just a logical outcome caused by an overly enthusiastic press release?

Closing trade at $0.315 per share, BION wrapped it up for 2012 losing a fair 23% in value on a volume of 3.415 million, its highest for the last six months. Thus, investors who hoped that BION shares were capable of still going strong despite their oversold status were dealt a huge blow. As it is, however, this move could have been fairly predicted for three main reasons, namely:

• technical setup
• fundamental position
• latest corporate developments

When it comes to technicals, BION‘s Relative Strength index had already gone ridiculously high up to 87% on Dec. 28, and we all know very well what this value means. The extraordinary value of the RSI was in turn a direct consequence of a continual upward trend which commenced in mid-December and lasted almost two weeks, thus changing BION shares’ status to way “oversold”.

From a fundamental point of view, the company is nowhere near as stable as its market cap of $63 million would initially suggest. If you were to spend this sum to buy out all of BION‘s outstanding stock, what you would get in return is:

• cash reserves of $24 thousand;
• negative working capital in excess of $2.8 million;
• 9-month quarterly loss of $2.3 million, up 73% on an annual basis (a/o Sept. 30, 2012).

So, are BION shares really worth $63 million at the moment? Not a hope in hell, even if the company’s patent-pending intangible assets were really worth the $1.3 million they are evaluated at.

In this respect, the latest company news about the change of office space and the solemn intention to build the first (of many more to come) urea plants did not exactly create the hype they could otherwise have.

Even though BION seems to have set their eyes upon the high-potential fertilizer business, the company does not seem stable enough to make a breakthrough. Provided that managers really succeed in patenting the technology they claim to have already developed, they could take a chance on the real market subsequently.