Cord Blood America’s stock price gained whole 26.09% yesterday on a volume, exceeding more than four times the average. After the recent low levels and the shares being oversold for quite a long time, yesterday investors were optimistic already shortly after the market opened. Several reason for the sudden high interest can be pointed out.
The biotechnology stock was mentioned in a number of stock newsletters, which must have added to the demand. Though, it seems more like some expected speculative profits have attracted a lot of investors over the past two days. On Monday it has been announced that a short squeeze is expected to begin when shares of CBAI close above $0.0059. Yesterday, they closed at $0.0058 and more than 30% of the trading volume was made up by shorters.
There were also news from a fundamental point of view. The company announced in a press release that it has completed the due diligence related to a planned acquisition of another cell stem storage company, which is based in Argentina and according to the press release, it is even profitable. That information has not been confirmed yet, but looking at Cord Blood America latest 10-Q and its previous acquisition, there are good reasons to be doubtful.
Cord Blood America’s business does not seem to be in the best shape. The company has working capital deficit, its ability to collect payments from customers and to pay its own bill has worsened recently, thus in all cases additional capital will be required.
During this years first quarter, revenues from the core business, which is cord blood stem cell preservation, have increased due to expansion of the customer base, though they do not seem to be growing fast enough and the overall net loss increased by nearly 53% compared for the same period last year. Management believes to be able to eliminate the losses and the negative cash flows through strategic acquisitions. A step in that direction has been made in March this year through the acquisition of the German company stellacure, GmbH, whose business is also to collect and store cord blood samples.
This is considered an opportunity to grow throughout Europe, as stellacure has established sales channels not only in Germany, but also in Spain and Italy and has also connection with the German Red Cross. Though, stellacure’s business also is still to be developed and optimized, as it has been making only losses over the past several years.
