Citron Research Says To Stay Far Away From Organovo
Organovo (NYSE: ONVO) closed nine percent lower on Tuesday after Citron Research published a blog post saying to avoid the stock.
If you’ve never heard of Citron Research, it’s the brainchild of Andrew Left, an activist short seller who has passionate fans as well as equally passionate critics.
Most, however, admit that over the 14 years that Citron Research has been online, he has exposed damning data on companies that is hard to refute. His critics say that he’s being paid by hedge funds to short stocks and publish his activity on his blog.
But what’s his problem with Organovo? Watch this CNBC to find out.
According to Left, the company has plans to bio-print organs. First up, a 3D liver assay. According to the company, it has data that proves that the printed tissue demonstrated key liver functions for up to 40 days. When the news broke in October, the stock went from $6.50 per share to $7.50. Tuesday, the stock closed at $10.10 with a market cap of $780 million. That all sounds good but here are some problems pointed out by others including Left.
While the data is positive, the company hasn’t turned a profit and still doesn’t make anything. The liver assay isn’t expected to reach the market for another year and that’s not guaranteed. Second, this isn’t a groundbreaking product. A Seeking Alpha article points out the multiple 3D printed liver assays on the market and the market isn’t very large to begin with.
But the reason Left posted an “URGENT” message to his blog has nothing to do with any of these reasons.
According to the report, the Swedish Financial Supervisory Authority issued a warning about Kanagawa Associates cold-calling on Oganovo stock—a practice illegal in the United States. He argues that this could be contributing to a stock price that his higher than a company with no sales or products deserves.
He also said that a company this large should have sell-side analyst coverage but it’s only covered by one firm—JMP Securities, a placement agent for four million shares.
Finally, investors might be buying on the rumored partnership with Pfizer—something the company itself has reportedly talked about but nothing has materialized for over one year.
Short interest is low in this name possibly indicating that investors feel secure with the company’s story but Left is putting his money where his mouth is. In the same CNBC interview, he says that he has shorted the name.
Disclosure: At the time of this writing, Tim Parker had no position in the company mentioned.
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