|Downward Pressure on Neptune's Shares Dissipating|
|Friday, 16 September 2011 05:28|
If true, that fact alone is likely to be a catalyst for another strong up move in NEPT.
NEPT had been holding up extremely well under the initial onslaught of the market weakness in August, actually hitting new recovery highs (cresting $4.40 TWICE, on August 1st and again on August 15th) in the midst of the S+P500's first test of 1,100.
Since then, on top of the continuing market pressure, there were 3 sources of non-fundamental pressure which hit the stock in succession, as follows:
1) The shares from the $12.5mm financing in April became free trading on August 18th. This impact was obvious, as CIBC World Markets sold about 450,000 shares on the TSXv exchange in Canada, relentlessly pounding bids for 7 trading days starting August 18th. This pressure has almost certainly passed; we know that most of the shares from that deal went into very strong hands, including the lead $4.5million order from one of the most highly regarded healthcare funds in the US.
2) Some investors may have become worried that Neptune might be subject to the same patent risks as Amarin: AMRN was hit very hard starting on August 17th, on reports that a key Amarin patent application was rejected by the US Patent and Trademark Office. If finalized, the rejection of AMRN's patent would be based primarily on the fact there is arguably a lot of 'prior art' in the area Amarin is seeking to patent. Fortunately, this is not a problem for Neptune: many of their most critical patents have already been granted, AND--since Neptune is the original pioneer in krill oil--there is no prior art for the USPTO to use as grounds to disallow their pending patents.
3) Just as it seemed that NEPT had started rebounding (ie., the stock was up about 7% on good volume on September 1st, back to $3.68), another source of non-fundamental pressure hit: the rights offering for Acasti (Neptune's pharmaceutical subsidiary). Rights offerings almost always put significant pressure on the stocks involved. In this case, any investors holding NEPT on the ex-rights date of July 5th ended up receiving Acasti rights. And, on or around September 1st, it appears some NEPT holders started selling some NEPT so they could buy shares of Acasti as part of the rights exercise. Thankfully, that pressure should be out of the way as the last of the rights-related selling clears up over today and tomorrow.
NEPT was doing phenomenally well when the only source of non-fundamental pressure was the market: even in the face of brutal markets, it looked like Roth Capital's research report on NEPT (with a $9 target) was going to help carry NEPT into the $5-$6 range on its own. It was really the 2 NEPTUNE-specific non-fundamental factors which brought the stock to where we find it today: the shares from the financing came free trading, and then the pressure from the rights offering showed up. With those pressures now just hours from being behind them, we think NEPT can start fighting back, just like it did in early-to-mid-August- as it hit new highs in the face of a dismal market. Some very strong near-term catalysts which I will be covering in my next article month should help NEPT as well.
If anyone requires fortification of their resolve on NEPT, dig up and read Roth Capital’s analyst report with a $9 target; keep in mind that the $9 target includes nothing for NeuroBio Pharm, Neptune’s division that did the Alzheimer’s trial whose results should be out this fall.I would also refer readers to the sum of the parts valuation from our original April report on Neptune. We were the first investment news portal to cover the stock and bring it to the attention of retail investors and the fundamental developments since April have been nothing but positive. In fact, they reinforce our conviction that NEPT can be a stock with a much higher valuation--especially if they get trial results which highlight Neptune Krill Oil's efficacy in Alzheimer's.
We'll follow up this report early next week with more information on some of the upcoming catalysts that should spur more buying in the stock and leave shareholder happy; perhaps even pleasantly surprised.