EmergingGrowth.com NewsWire – EmergingGrowth.com, a leading independent small cap media portal with an extensive history of providing unparalleled content for the Emerging Growth markets and companies, reports on Eastgate Biotech Corp. (OTC: ETBI)
- Pre-Financing Market Value was $15.5 million
- Current Market Value approximately $4.7 million
- Above Market Funding at $.01 or $9.4 million Enterprise Value
- Artificial Pressure on Stock Removed
EastGate Biotech Corp. (OTC Pink: ETBI), is worth considerably more than the current stock price suggests and has been kept artificially low due to the involvement of Northbridge Financial. ETBI’s settlement agreement with Northbridge is a monumental achievement for the company because it represents that they have access to capital in a non-toxic manner and now free market forces can lift the stock without a structured lender selling shares to squash the rallies. With such a recent concentration of press releases over the past month it’s easy to see that ETBI is going into a super news cycle and has removed all structural impediments to price appreciation. The equilibrium market value of ETBI was $15.5 million prior to the 3(a)(10) financing.
Above Market Money Raise
In the corporate update ETBI mentions non-dilutive financing 3 times and almost every press release since then has had that same language. Investors have been gun shy to put long term money to work for fear that the company was going to resort to another Northbridge type deal. With the settlement behind them this sends a very strong message to shareholders that those days are over. CEO Anna Gluskin said “We are committed to pursuing non-dilutive and non-toxic financing and are taking the steps to clear the path to collaborate and engage with other financial opportunities to pursue our development objectives.” Are they just words or do they have substance? In December they were raising money at the $.01 valuation which at the time represented a 1000% premium in price. This was disclosed in the subsequent events of the 2016 Form 10-K.
The 40 Million Reserve Represents the Size of Potential Northbridge Short
The company reserved 40 million shares to settle the outstanding debt to auditors for $208,000 to get them current and an additional 140 million shares to settle the outstanding debt of $724,108.50 owed to William Abajian the companies Advisor and business development agent. Before this settlement took place 309,522,175 shares were issued as of December 31, 2016. With an authorized share count of 450 million the maximum number of shares the company could issue at the time was 140,477,825. The bottom line of this math exercise is that Northbridge was expecting 180 million shares but only received approximately 140 million shares leaving Northbridge 40 million shares short. This 40 million is the quantification representing the shares reserved in the press release.
Unusual Trading Activity Likely Links to Northbridge
After the stock was clobbered by Northbridge’s 3(a)(10) financing in April and May of 2017, the stock woke up on February 16th when investors realized a real story was developing and has traded 387 million shares since. The current float is less than 350 million which means the entire float has traded since February 16th ushering in a new group of shareholders. The unusual trading activity from March 6 through March 12 where over 20 million shares traded daily accompanied by downward price spikes keeping the stock in check look like a new 40 million share short position was established between .004 and .0065 expecting the company to pay out in stock to close the short established. The Northbridge Settlement fills in the blanks why the stock has been unable to rally and get to the equilibrium point of $.016.
Artificial Pressure on Stock Price
The only shares issued by the company in the past year were to Northbridge for a total of 140 million shares when the stock was at .05. This represented a roughly 45% dilution to the 310 million shares and the $.05 stock price representing a $15.5 million market valuation prior to the Northbridge Financial deal. With the dilution the stock should have only fallen to $.0275. Instead the stock dropped 95% to $.0008 as followers of Northbridge short the stock in advance of Northbridge’s selling creating a panic in the market and allow these short actors to short even more knowing that a big seller can keep the price down. The goal of these pack selling tactics is to keep the price so low the company is unable to get additional financing and has to close up shop and the shorts never have to cover. This is a great tactic assuming the company doesn’t have a future but ETBI has the only viable solutions to stem the diabetes epidemic growing in the world. Factoring in the control block issued to management the new equilibrium price is $.0165.
Move to Get Current on Filings
The company is clearly making progress to remove the stop sign and get current. There are tweets that indicated they are very close to wrapping up the 2017 financials. This was also mentioned in a Gunpowder Capital Release and the company followed through with the 2016 release.
Licensing Deals Flowing
There have been 2 MOU’s that have been signed in the past 30 days in just the Philippines. This means they have 2 potential partners vying after the same license which creates tremendous pressure to ink a deal. In ETBI’s press releases there have been overtures that they are expanding globally and it’s not hard to see the breadcrumbs are pointing a trail to more news in respect to this area. Additionally, ETBI’s primary business development person is in the Philippines hammering out a definitive JV agreement that should bring in development money to get the oral insulin mouth rinse FDA approval. From the tenor of Abajian’s tweets it appears a definitive deal is imminent. Following Abajian’s tweets has been on the mark when on February 20th he tweeted “Northbridge is gone for good.” In a tweet yesterday Abajian posted a picture of the team and said this could be a “blockbuster drug.”
Here is the tweet:
High level meetings with Government Agency’s today in Manila. All all went perfectly. $ETBI is well positioned for Great Sucess. Insulin Mouth Rinse is well accepted and could be a block buster drug for Type 2 diabetics globally. I am so proud of my team in the Philippines. “🤩”
Under many metrics ETBI is extremely undervalued. From the company’s press release today it is clearer how the stock got so undervalued due to structural reasons. With those structural barriers removed the stock should have an easier time finding equilibrium as Northbridge can no longer count on their agreement to be used as leverage to cover a short position which means they take on real market risk and are far more susceptible to a short squeeze should they desire to maintain a position. The underlying fundamentals of the company are better than they were at the end of 2016 when they had a market capitalization over $15 million. They are on the cusp of at least one definitive agreement from 2 potential suitors in the Philippines. Any deal would need to be a minimum of $5.0 million but with 2 suitors vying for a position $10 million seems more likely. As investors wake and see the news and connect the dots it will not take long for this stock to move back to its equilibrium price of $.016 which represents over a double from the current trading price.
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