The obviously overvalued penny stock of Organovo Holdings Inc. (ONVO) had their 2nd largest volume trading session Thursday for all the wrong reasons. ONVO stock price rose to as high as $4.50 after falling from their prior Seeking Alpha PR pump high of $10.90 after some of the truths already available to the public were exposed. We are willing to go even further to state that ONVO, not only will be at $1 before the end of July, but that it will fall below $1 soon after. Why?
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Reason #1: ONVO stock led the Million Dollar Volume list of penny stocks on The OTC on Thursday.
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Being at the top of that list is the “Kiss of Death”. Even the best PR behind Great Wall Builders’ GWBU and history behind the PR group can only keep that going for so long.
Reason #2: 31,995,974 shares are now added to the 43,693,241 shares outstanding with the recent S-1 filing. (see here) The weight of those added shares outstanding is intensified when you consider the basis of those shares. This is the clip from page 12 of Organovo’s recent 10-Q:
During 2012, concurrently with the closing of the Merger and in contemplation of the Merger, the Company completed the initial closing of the Private Placement of up to 8,000,000 units of its securities, at a price of $1.00 per unit, with the ability to increase the offering to an aggregate of up to 16,000,000 units. Each unit consisted of one share of Common Stock and a warrant to purchase one share of Common Stock. The Company completed three closings under the Private Placement during the three months ended March 31, 2012, and raised total gross proceeds of $13,722,600 and total net proceeds of $11,593,066. The Company issued 13,722,600 shares of its Common Stock and warrants to purchase 15,247,987 shares of its Common Stock (including warrants to purchase 1,525,387 shares to former holders of the bridge notes) exercisable at $1.00 to investors in the Offering. The placement agent and its selected dealers were paid total cash commissions of $1,372,260 and the Placement Agent was paid an expense allowance of $411,678 and was issued Placement Agent warrants to purchase 6,099,195 shares of the Company’s Common Stock at an exercise price of $1.00 per share.
ONVO Stock Chart
Essentially, there was a 73% increase to the total number of shares outstanding, all of which has a cost basis of $1 whether its one share or one exercised warrant.
Add the warrants issued to the Placement agent and your talking about a possible total increase in shares outstanding of 38,095,169, an 87% increase all at $1. That’s a whole lot of profit booking for those who were involved in the private placements and likely what caused the drastic drop in ONVO PPS on Wednesday. But it’s far from over.
Reason #3: “If you only knew the power of the dark side. Obi-Wan never told you what happened to your father.” 3-D biology capabilities to create tissue on demand recreated/regenerated Luke Skywalker’s hand after Darth Vader cut it off with his light saber at the climax of The Empire Strikes Back. Now, Organovo claims to be able to do the same type of tissue on demand creation for research and surgical applications.
This sounds great since you wont need to have a skin graft off you ass put onto your face, hands or other body parts, but ONVO at its current price could cost you your ass. If this NovoGen MMX Bioprinter™ is as real as they say it is, then where the hell is it? Is it the $144,800 prepaid expense on the recent 10-Q or is it the $98,671 other asset? Fine, it’s held off the books or in some basement somewhere but it is “light years” away from being approved for use and generating revenues. All revenues booked were nothing more than a grants from th government for a couple hundred thousand dollars. College kids get that to study the mating rituals of Armadillos.
Reason #4: Multiply the dollar volume ONVO stock traded Thursday by the number of trades executed and your in the ball park for the price tag testing is going to cost to get this NovoGen MMX Bioprinter™ approved. Since inception, Organovo has had negative cash flows from operations with cash of $10,352,507 and an accumulated deficit of $37,385,108 as of March 31, 2012. Furthermore, with operating expenses of $3,555,626 for the quarter, they barely have enough to keep the lights on through the end of the year.
The amount of money that it is going to take for Organovo to get this 3-D tissue printer off the ground will force them to file with FINRA to create more authorized shares and begin systemically issuing them for cash each time the bill collectors come by. The only way to avoid that, is to have a “white knight” rescue them by taking control of a large percentage of their future revenues.
Reason #5: If this is so revolutionary, why did ONVO take over Deborah Lovig’s Real Estate Restoration and Rental Inc. that she started with James Coker, a well known Nigerian Employment scam artist, that had her summer vacation house as the sole asset. Why didn’t Organovo start their own corp since they have been in business since 2007. Also, it’s not like someone came in and had them swap their shares for cash and walk away like in most shell transactions. Lovig signed every document as the President of Organovo well after the Merger. (see here)
Obviously, Lovig is already off the books as President and further digging to determine exactly how much she and Coker were paid for their shell or how many shares they were issued just isn’t worth the time. ONVO is going to $1 and below within the next month.
Click here to view the SEC filings for ONVO.
Bottom Line: This penny stock has one thing going for it: It’s address. The fact that Anandy’s Pharmaceuticals name is on the sign together with Organovo on Oberlin Drive in San Diego is the only thing to suggest ONVO is legit. Regardless, the cash flow isn’t there and for a biotech in research and development still, start to think ACTC or GNBT when you think of putting money into ONVO.
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