Friday, October 12, 2012

Fibrocell Science FCSC - Taking one large step forward

Fibrocell Science FCSC - Is a position I have had for quite sometime now and is a great value at the current 15 - 17 cent price range. I thought I would provide some clarification since a lot of investors are incorrectly interpreting the recent news surrounding the company. The recent private placement deal is a huge positive for FCSC investors because of the following reasons:

Private Placement - NRM VII Holdings I, LLC, a Third Security, LLC affiliated fund and other investors purchased 450 million shares at 10 cents per share worth a total investment of $45 million. When you take into account that FCSC currently has about 100 million shares outstanding, the new investors are valuing the company at $55 million. This means that the pre-deal market cap of $15 million is way undervalued.

Debt - Concurrent with the deal the company will be converting part of it's debt into equity with the rest being paid off from proceeds of the private placement. FCSC will thereby be debt free upon completion of the deal. This is huge for FCSC investors since this removes the risk of bankruptcy in the near term. Debt is the biggest risk to growth companies in the early stages due to the lack of cash flow.

Up-Listing - FCSC recently got approval to effect a reverse stock split of the outstanding shares of the Company's common stock, prior to July 31, 2013, if the Board believes such action will facilitate the listing of the Company's common stock on a national securities exchange. I'm not a fan of reverse stock splits but I'm a huge fan of up-listing to a national exchange. This should bring in new investors that will increase market cap.

Partnership - We will be receiving more information regarding the partnership with Intrexon shortly but I expect FCSC to benefit by getting access to new IP that should improve manufacturing production as well as further the development in clinical trials.

Institutions are accumulating a position which is evidenced by the sudden and large increase in volume over the last few days. You have to think like a institution here and accumulate along with the big investors. I will hold on to my current position but will look to add to it once we get confirmation of the up-listing, afterall the company was nice enough to give us a target date which is before July 31, 2013.

FCSC is in my highly speculative portfolio so be sure to do your research.