Problems Piling Up for Biozone Pharmaceuticals Inc (OTCBB:BZNE)
It’s pretty clear from the chart on the right that Biozone Pharmaceuticals Inc (OTCBB:BZNE)’s shareholders have seen better days. The last green session was registered more than two weeks ago and the cumulative losses since then amount to no less than 40%. Things look even worse for the people who got in back in mid-October when the ticker was nudging $1 per share and the catastrophic performance is showing that investors seem to have lost confidence in BZNE. But why?
Well, you can see from the chart that one of the most horrific sessions was registered on November 13 when the ticker managed to shift a record-breaking 7.3 million shares and hit an intraday low of just $0.23 (66% below the then-current value). The reason for the selling was a letter from Elliot Mazza, BZNE‘s CEO, in which he explained that the company is going to transfer virtually all of its operating assets to MusclePharm Corp (OTCMKTS:MSLP) in exchange for 1.2 million MSLP common shares. Mr. Mazza said that the transaction is “the first part of this transition to increase shareholder value”. It’s clear that traders tend to disagree.
Five days after the announcement of the deal the company published the 10-Q covering the third quarter of 2013 and the figures in it didn’t really help BZNE regain the investors’ interest. Here’s what we’re talking about:
- cash: $529 thousand
- current assets: $2.8 million
- current liabilities: $15.2 million
- quarterly revenues: $2 million
- quarterly net loss: $5.3 million
When you compare the financials above with the results of the second quarter you’ll see that the net loss is quite a lot bigger and that the current liabilities have grown by more than 50%. The revenues and the cash reserves have been increased but these factors shouldn’t play a role since most of the assets are going over to MSLP, right?
No. At least not yet. About an hour before yesterday’s opening bell a law firm specializing in shareholder rights called Johnson & Weaver, LLP announced that the deal between BZNE and MSLP has caught their attention and that they will be conducting an investigation to determine the presence or absence of a breach of fiduciary duties. A few hours later, another law firm, Levi & Korsinsky, LLP issued a press release of their own and said that they will also be looking into the case.
Of course, at this point, the outcome of the investigations is impossible to predict but whatever it is, part of the damage has already been done. A public company’s credibility is a fragile item and in the case of BZNE, it will probably be severely affected by the suspicions which, in turn, might prompt some more selling in the coming sessions.
It wouldn’t have been so bad if the amount of money involved wasn’t so huge, but as we mentioned in our previous coverages, investors flocked over BZNE back in October when they got lured in by a couple of articles touting the company and its largest shareholder, Dr. Philip Frost. We also noted that you should base your investment decision on your due diligence, rather than on somebody else’s optimism. Now you can see why.
And while BZNE was losing ground yesterday, other tickers were climbing towards the higher end of the charts. Day Two of the pump for Fresh Healthy Vending International Inc (OTCBB:VEND) went even better than the first one as the ticker gained more than 54% after just six and a half hours of intense trading. VEND is not the only promoted stock to be doing well. Life Stem Genetics Inc (OTCBB:LIFS) broke yet another 52-week high, continuing its three-week winning spree.
