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Is Bioamber Inc (OTCMKTS:BIOA) On The Brink Of Succumbing To Debt Load?

Is Bioamber Inc (OTCMKTS:BIOA) On The Brink Of Succumbing To Debt Load?
Written by
Jim Bloom
Published on
February 14, 2018
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Bioamber Inc (OTCMKTS:BIOA) prospects have turned from bad to worse, just as we thought it was in for a bounce back, after plummeting to all-time lows. Investors’ confidence in the stock has hit all-time lows, amidst concerns about the company’s core business and spiraling debt levels.Since our last update, the company’s market cap has slid from $20 million to 8.96 million. As it stands, there is no denying that the stock is in a precarious position trading volumes have also taken a hit. Just as we stated in our previous analysis, the company needs to post better than expected fourth quarter financial results, if the stock’s sell-off wave is to be brought under control. BIOA Daily ChartA look at the charts indicates that the stock is engulfed in a strong bearish trend with no signs of a potential pullback. With the stock trading at the $0.088 handle, it is becoming clear that it could slide to its 52-week low of $0.07 on its way to registering a new record low. On the upside, the stock needs to close above the $0.18 mark to have any chance of rising to the $0.42 mark, where it opened in the year.About BioAmber Inc. BioAmber is an industrial biotechnology company. It boasts of a technology platform that combines industrial biotechnology and chemical catalysis to convert feedstocks into chemicals that are used as replacements for petroleum-derived chemicals.The company produces and sells bio-succinic acid to various customers across the U.S and Canada. Bio-succinic acid is commonly used in various applications not limited to plasticizers, personal care products, resins and coatings, lubricants, fine chemicals, and food additives.Recent DevelopmentsInvestor confidence in BioAmber has plummeted to all-time lows in response to the company racking up too much debt. The company’s debt levels have surged to $52.3 million over the past 12 months, comprising of both short term and long term obligations.Taking into consideration the fact that the company has current cash and short-term investments levels of $16.2 million, it remains to be seen how it intends to meet its financial obligations going forward.The company could struggle a great deal to meet its near-term liabilities should an unexpected adverse event occur given its limited cash flows.In what is seen as an attempt to strengthen the balance sheet, BioAmber has been offering shares of its common stock a string of public offerings.The stock offering spree has seen the company price 40 million Series A units, consisting of one share of common stock and one Series A warrant, for the purchase of one share one share of common stock.The pricing of the offering at $0.25, however, raises serious doubt as to whether the company will be able to generate the expected $10 million in proceeds. Given that, the stock has plunged to all-time lows of $0. 088 a share, investors could shy away from taking part in the offering.BioAmber has already had to cancel one registered direct offering in unclear circumstance. The company had entered into definitive agreement with certain institutional investors for the purchase of an aggregate of 46.67 million Series a Units.With the termination, the company has missed out on a potential $7 million in gross proceeds before deduction of underwriting commissions and fees.BioAmber Inc. pursuit of public offering comes at a time when it urgently needs money for working capital and to finance other general corporate purposes. However, the offerings have gone a long way in increasing stock dilution a move that has not gone well with some investors.Amidst the cash flow woes that continue to compound the stock’s sentiments on Wall Street, BioAmber has made impressive strides on the operational business front. The company has already reported positive results from an independent commercial trial on the effectiveness of its Bio-Succinic Acid, an ingredient in animal feed for nursery pigs.Trial results indicate that the feed supplement demonstrated substantial benefits on growth performance and gut health in nursery pigs under dietary and environmental challenges. In Vitro tests, the supplement also exhibited antimicrobial activity against certain microorganism at lower concentrations

“Animal feed represents an extremely large market opportunity for BioAmber, and these studies show that our product could play an important role in antibiotic replacement. BIO-SA™ can assist the Animal Feed industry's continued move away from antibiotics as well as its ongoing drive for enhanced feed productivity, while at the same time improving the overall sustainability of the supply chain,” said CEO, Richard Eno.

Bottom Line It is becoming clear by the day that it will take breathtaking announcement or development for BioAmber to bounce back after plunging to all-time lows. The fact that the company faces an uncertain future when it comes to cash flows is one of the reasons why remain pessimistic about the stock prospects in the short term.That said, it might be best to take a back seat until the company can sort its financial woes. Fourth quarter and full year financial results should also shed more light on the company’s long-term prospects after the recent sell-off.We will be updating our subscribers as soon as we know more. For the latest updates on BIOA, sign up below!Disclosure: We have no position in BIOA and have not been compensated for this article.Image courtesy of creditdebitpro.com

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