The last time I wrote about iBio (NYSEAMERICAN:IBIO) was the middle of September. Although there was no chance you’d see me investing in the company, I felt like its selection of IBIO-201 as its Covid-19 vaccine was a step in the right direction.
Fish or cut bait and all that.
However, since then, there has been hardly anything notable to write home about for this novel coronavirus stock. Yet, InvestorPlace’s Louis Navellier continues to rate it a strong buy. I guess he knows something I don’t.
How little an amount of news has come out of iBio’s investor relations department? Two press releases.
The first on Oct. 5 was to let investors know it had regained compliance with the NYSE American stock exchange. I’m sure you were losing sleep over that one.
The second on Oct. 2, announcing its Master Services Agreement with Safi Biosolutions that will see iBio manufacture 10 proteins for the early-stage biotech company as part of Safi’s cell therapy program.
Also, iBio will invest $1.5 million in Safi. The convertible note pays 5% annual interest and can be converted into common stock anytime over the next three years. That news flash is a little more compelling.
But nothing on the Covid-19 front.
IBIO Stock Is Still a Speculative Buy
Since very little has surfaced over the past seven weeks to alter my view about iBio, and the stock price has barely moved, I’ll continue to argue that it remains an interesting bet for speculative investors. But only speculative investors.
However, just as I was curious about Lincoln Park Capital’s interest in the biotech company in May, I’m equally interested in billionaire Ken Dart’s involvement and subsequent selling down of his position.
The Fly reported on this subject in August.
“On August 12, Eastern Capital sold an aggregate 7,629,693 of the shares of iBio’s Common Stock in open market transactions. On August 12. Eastern Capital ceased to be the beneficial owner of more than five percent of the shares of common Stock of … [iBio].” The Fly stated on Aug. 13. “As of the date hereof, Eastern Capital Limited beneficially owns 1,000,000 shares of iBio”s Common Stock, representing 0.6% of iBio’s outstanding Common Stock.”
I went to a Reddit message board to get some opinions from actual investors on the matter.
“Apparently there’s a requirement that in order to receive US government funding, the main shareholders cannot be based in foreign countries,” stated Reddit user zerglingcrusher. “I have not researched the legitimacy of this statement but if this is true, IBIO CEO likely is pushing Ken Dart out in order to qualify for US gov’t funding. And the only reason he’d be doing so is if he knew it was imminent.”
That statement came on or about Sept. 9.
Further down the Reddit thread is the following comment:
“To clear the way for potential government funding. Ken Dart denounced his US citizenship some time ago and as such invests from other countries such as the Cayman Islands. The government will not offer grants or funding especially under operation warp speed if more than a certain percentage of the company (I believe 25%) is foreign owned,” stated Jay_G63 in early September. “Ken Dart’s huge ownership percentage blew way past that threshold and as such he had to divest. He will on the other hand make 5% of all incoming money (including government funding) which was apparently written into his initial investment agreement… So I believe this was a shrewd move on his part. Stay long, this company has legs.”
The company has made no inference to date that it is about to receive a sum of money from the U.S. government to support future research and development. Nor is the 5% number Jay_G63 mentions anywhere for public consumption.
And yet this Reddit user believes iBio is the real deal. Good for him or her.
However, as they say, money talks and bs walks. I don’t know about you, but I don’t have a lot of faith in this Reddit user’s account of the facts.
Why Would Ken Dart Sell?
From what I can gather from this Reddit thread, Ken Dart owns many hotels that are hemorrhaging cash. If you’ve followed the actions of Richard Branson, who also owns a lot of businesses affected by Covid-19, Branson had to sell a bunch of assets to keep all of his investments operating, including shares of Virgin Galactic (NYSE:SPCE).
Before Covid hit, Branson affiliates owned more than 50% of Virgin Galactic. By July 30, the stake had fallen to less than 30%.
I’ve always been a big believer that people sell stocks for all kinds of reasons, but buy for only one — the stock is undervalued.
According to the Bloomberg Billionaires Index, Ken Dart is worth $6 billion. I find it hard to believe that he would sell 36 million shares of iBio’s stock — average selling price of around $3.75 — to satisfy his hotels’ debts.
First, he’s likely to pay taxes on those gains, and secondly, it’s only 2.3% of his net worth.
So, either he believes iBio doesn’t have the potential to be a ten-bagger, and the opportunity cost of hanging on to them is too high, or his financial problems are much greater than the press is letting on.
Either way, it says very little whether iBio is a good investment or not.
The Bottom Line
The other day I wrote about Yalla Group (NYSE:YALA), a Dubai-based, Chinese-owned, social media platform that went public Sept. 29 at $7.50 a share. Up 20% since its public offering, I like the stock because it makes money.
Now compare that to iBio, a company that’s got lots of promise but can’t keep a billionaire engaged long enough to reach the promised land.
Ten times out of 10, I’ll recommend YALA over iBio to InvestorPlace readers.
However, if you want to spin the Wheel of Fortune, iBio remains a tempting bet for speculative investors. For everybody else, there’s little evidence this biotech is worth a second thought.
On the date of publication, Will Ashworth did not have (either directly or indirectly) any positions in the securities mentioned in this article.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia. At the time of this writing Will Ashworth did not hold a position in any of the aforementioned securities.