Bionano Genomics (NASDAQ:BNGO) is a San Diego-based instrument company that offers genome analysis equipment. It is not yet approved for diagnostic use, so it has limited sales. However, due to a number of recent capital raises, BNGO stock now has a $2.378 billion valuation, based on my calculations. This is incredibly high, and well over 100 times two-years-out forward projected sales.
This is so far beyond the company’s inherent value that I struggle to see how it has happened. But first, let me show you how I calculated the estimated market capitalization for the stock.
Calculating Bionano Genomics’ Market Valuation
A lot of people don’t realize that the common way to calculate the market cap — total shares outstanding multiplied by the price of the shares — is not always the best way to calculate the actual market capitalization. This is because in a company like Bionano, that is swiftly issuing shares through offerings and warrant exercises, the number of shares outstanding change daily. Moreover, the company does not completely update the market on its actual share count.
For example, on Jan. 19, the company issued an 8-K Current Report in which it stated that there were 238,496,902 shares outstanding, as of Jan. 15.
But then on Jan. 20, the company filed another 8-K saying it had commenced an underwriting agreement with Oppenheimer to sell 33.333,350 new shares, In addition, the underwriters had an option to buy 5 million shares for themselves. That will bring, assuming all the shares sell, 276.83 million shares outstanding.
But there is no indication so far by the company if it has sold these shares. In addition, to confuse matters, the company filed a prospectus on Jan. 21 that shows a lower number of shares outstanding. For example, on page S-3 Bionano says that after the offering there would only be 186.68 million shares outstanding. This directly contradicts the 8-K it issued two days earlier on Jan. 19 saying there were already 238.496 million shares outstanding.
How Much Cash The Company Actually Has
And that is not it with the confusion. The company also says in the Jan. 21 prospectus that $101.8 million in cash has come in from an at-the-market offering run by Ladenburg Thalmann. How many shares were issued with that ATM offering? Are they already included in the 186.68 million or the 276.83 million share numbers above?
My best guess is that there are now at least 276.83 million shares outstanding and probably more due to more warrant exercises. That puts BNGO stock, at $8.59 on Tuesday, on a market capitalization of $2.378 billion.
Moreover, my best guess is that it has about $350.9 million in cash. But I could be way wrong. Clearly, the company needs to let all the moving parts settle down a bit and then clarify its financial position.
What To Do With BNGO Stock
If my assumptions are correct, this means that cash now represents 15% of its $2.378 billion market value. But this is for a company that made a minimum of $3.8 million in sales in the past quarter, according to its prospectus. Total sales will be about $8.3 million in 2020.
Granted, its sales have a good chance of exploding. A recent Seeking Alpha article on the company points out that gene sequencing has just a 50% rate of success compared to their instrument, the Saphyr, which skips sequencing. It detects structural variations in human chromosomes. It acts as a complementary product to sequencing.
As a result, the company sold just 22 instruments in the nine months ending Sept. 30. It also makes money selling the ingredients like pigments and reagents. Presently it is in research locations only.
Analysts expect just $18.37 million in sales next year. That means at $2.378 billion, it trades at 132 times forward sales. That is a very aggressive valuation, and it frankly assumes that sales will go “hockey-stick” after 2021. Assuming they don’t, BNGO stock has too high a valuation.
Everything depends on sales spiking over the next several years. For that to happen, the company will need to get FDA approval for its medical devices in diagnostic and hospital locations. That implies clinical trials. Luckily it now has the cash to conduct such studies.
Look for good things to happen with Bionano Genomics, but for the time being BNGO stock appears to be fully valued.
On the date of publication, Mark R. Hake did not hold a long or short position in any of the securities in this article.