Weekly thought on $IBIO, $LRAD, $SPOXF

Before you read on, please be aware that the analysis below is my opinion only and may include flawed assumptions and inaccuracy of logic; therefore, caveat emptor applies here.  Furthermore, all emphasis (color-coded, boldness, and underlined) on the excerpts are my own.

Given the weekly bar is down this week, the “Sell in May and Go Away” theme song may be more prevalent this month. SP-500_weekly Albeit a weekly red bar, the positive characteristic I could see is the long tail (aka shadow) below the solid red body.  The long tail meant the bull beat back the bear to finish with a spinning top red bar.  This could mean indecision in the bear territory.

However, with half more month to go before June begins, it is vital that the long fights back to regain control to close the month of May without completing a bearish engulfment monthly bar.SP-500_Monthly The monthly SP500 chart above clearly showed that a bearish engulfment bar is possible if the bear continues to push downward.  If that happens, the probability of continuing downward momentum is better than 50/50 in the months ahead.

This week, I closed my $CRBP on Monday morning after the scary gap-down on the SP500.  Since I bought $CRBP purely for the technical bounce, a gap-down on the broad market like the SP500 could bring down many stocks, so I exited without hesitation.  Despite hindsight of a profitable rebound if I had held through Wednesday, it is pointless to second guess myself.  The wild swing of $CRBP from Monday to Friday spoke volume.

I also closed the $CARA August call options I bought last week when I came upon the article, “Cara Therapeutics’ Korsuva Is Likely To Fail In Itch, Stock To Trade To Cash ($2.50/Share, 87% Downside).”  The critical point in the article that convinced me to exit the call option position is the excerpt below:

CARA_KappaAgonistFailed

If I had known about this failed Phase III with another kappa-agonist based drug, I would never have bought $CARA options to bet.  Since my DD has its limit, I also rely on others who have more talents in this area; thus I’m open to new DD from others if they make sense to me.  I’ve no hesitation changing my mind if new info comes to light that contradicts my original expectations.

This week I added a new position on Sprott Inc., $SPOXF (SII.TO), to my port.  Although the company described itself as a publicly owned asset management holding company (from Yahoo Finance’s profile page), the description below from Sprott’s own webpage tells a bigger picture.

SPOXF_WhatWeDo

Basically, I’m buying $SPOXF in lieu of gold mining stocks or ETF such as $NUGT to prepare for possible inflation induced rally in the gold price.  If the U.S. is to embark in a trade war with China, you can bet that more products coming from China will no longer be cheap. Instead of a collapse in stock price like the one we saw in December, it is my opinion that we may see a gradual decline in the SP500 throughout the year. And I think $SPOXF will benefit when more investors start to allocate more of their assets to gold gradually.

Technically speaking, the monthly chart below showed an overall bullish pattern.SPOXF_Monthly The recent bounce from the correction of the previous rally to $3.29 (in April 2018) looks promising for another run-up to the resistance at $3.00 (89XMA brown dash line).

$IBIO – iBio released its 10Q this Friday, and inside contained a piece of information that provided some circumstantial evidence to support a new blog article from Marc Keiser titled, “Will there be a Buy-Out for IBIO-CDMO?”  Given that Marc published his article on May 8th, his timing couldn’t have been better when the 10Q offered a nugget of information that is in line to support the possibility of Marc’s prediction.

Marc’s article already covered a lot of basis regarding the experience and expertise of the new director, Thomas Isett, in the area of M&A (Mergers and acquisitions) so I won’t bore you with redundant information.  What made the little nugget of the information from the 10Q so pertinent is the “additional” work that Thomas Isett is involved in while being a director of iBio.  Below is an excerpt from the 10Q as posted by Marc Keiser at Stocktwits with some highlights of my own.

IBIO_ieAdvisingEngagemt

 

Below is an outline summary of the above excerpt:

  1. Thomas Isett is the Managing Director and sole owner of i.e. Advising, LLC
  2. i.e. Advising, LLC signed a consulting agreement with iBio dated as of February 22, 2019, to enter into a Statement of Work effective as of May 1, 2019, with a term from May 1, 2019, to August 31, 2019.
  3. The engagement is being conducted on a retainer basis for Thomas Isett at a rate of $40,000 per month.

Let’s be honest, as Marc Keiser mentioned in his stocktwits post, “Why would they need a consultant for 4 months (May-August) at a rate of $40K/month if there isn’t anything going on…

Before the 10Q, we speculated that Thomas Isett is helping iBio with the M&A process due to his experience and expertise.  The consulting agreement with i.e. Advising, LLC mentioned in the 10Q confirmed that Thomas Isett is, in fact, hired to perform his expertise at $40,000 per month for four months.  Do I need to remind everyone what Thomas Isett’s expertise is?

Another side note is that Marc brought up the departure of the Vice President of Strategic Business Development in the month of April to support his thesis in the blog post.  My speculation is that, with the signing of the consulting agreement with i.e. Advising, LLC on February 22, the VP took the hint and found a new job at the University of Missouri System.

There is a discussion in stocktwits as to who actually owns iBio CDMO?  I’ll let the excerpt from 10Q answer the question.

IBIO_CDMO_ownership2

 

Below is a summary outline of the excerpt above:

  1. On January 13, 2016
    1. The Eastern Affiliate contributed $15 million in cash for a 30% interest in iBio CDMO.
    2. The company retained a 70% interest in iBio CDMO.
  2. On February 23, 2017
    1. The company entered into an exchange agreement with the Eastern Affiliates to acquire substantially all of the interest in iBio CDMO held by Eastern Affiliates in exchange for one share of the Company’s iBio CMO Preferred Tracking stock.
    2. After giving effect to the transaction, the Company owns 99.99% of iBio CDMO.

Before I offer my opinion on the above, let take a glance at the information I found under Note 9 as I underlined on the excerpt above.

Below is an excerpt from Note 9.

IBIO_CDMO_ownership3Note9

There you have it, in the case of a change in control of iBio CDMO, the 1 share of Preferred Tracking Stock may be exchanged for 29,990,000 units of iBio CDMO.  This is essentially 30% of iBio CDMO.

From the above explanations from the 10Q, it is my opinion that iBio Inc. will collect 70% of the sales proceed in the event of the sales of the iBio CDMO division, and the Eastern Affiliates will collect the other 30%.

If I’m correct with my understanding of the ownership structure, then Marc Keiser is corrected to assume that the sale of iBio CDMO will add significant cash to iBio Inc’s cash vault to allow it to pursue its key fibrosis drug IBIO-CFB03 to its completion without further dilution. At least, the idea is that the division will be sold at an amount that will negate the need for future dilution.

I’m holding on to my shares for a possible event to happen between now and August 31, 2019.

LRAD – Despite volatility during the week on the company stock price, I continue to be super-bullish on this “boring” stock.  I suggest anyone interested in what LRAD has to offer to check out their video library to review their technology.

Click here to see the video –> LRAD Video Library

Due to downdraft on $IBIO, $TRXC call options, and losses on $CRBP,  my port gave back some for the week.

Current positions (in alphabet order):

Stocks = IBIO  LRAD  SPOXF

Call options = TRXC

Up 27.7% YTD

My 2 cents

From my camera:

016



Categories: Daily trading Journal, trading journal

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