Saturday, January 13, 2018

Want to understand Bitcoin? How well do you understand money?

Like a lot of people I have been trying to wrap my head around crypto currencies like Bitcoin and terms like Blockchain.  I think the concept is perhaps more easily grasped by people who've grown up in the Internet age than for a dinosaur like me whose first introduction to a machine for doing simple arithmetic was an abacus in grade school.  

No I don't mean Biblical times, I'm not THAT OLD.  There were adding machines around when I was a kid, but they were expensive and cumbersome and they didn't run on battery power.  

In trying to understand Bitcoin, Ethereum and the rest, I think its helpful if you take into consideration the history of money.  Understanding the evolution of currency won't help with the more technical aspects, but I think it helps explain why digital currencies have caught fire.  

In broad strokes money has evolved from coins, to paper, to digital transactions and now to digitized cryptocurrencies.  And with each step in this evolution there have been dinosaurs who prefer the older and, (for them) more trusted forms.  

When paper money was widely introduced in the 15h and 16th centuries I have no doubt there were some who preferred dealing with a coin containing some precious metal like silver or gold, something with hard and tangible value.  But over time paper money came to be accepted.

Paper money for hundreds of years was backed by precious metals, at one time there were "silver certificates" in circulation, pieces of paper backed by precious metals.  Then the so called "gold standard" was abandoned in most of the developed world and was replaced with what essentially are "fiat currencies".  

In a nutshell "fiat" means that the value of money is based on perception, or belief.  In turn that affects the normal market dynamics of supply and demand.  Why is the US Dollar worth more than the Canadian Dollar?  Because there is more demand for US Greenbacks than for Canadian Loonies.  And now we live in a world where physical money is used less and less, replaced by debit cards, credit cards and people using their cell phones with services like Apple Pay.   

That's a lot of preamble, but it shows money's evolution:

  • From something of hard and tangible value, a coin made of gold, silver, copper.
  • To a piece of paper leveraged against metals like gold and silver.
  • To simply a piece of paper leveraged against nothing.  
  • To a world where people transact thousands of dollars worth of monetary exchanges without ever once exchanging any physical currency.  

And now we have crypto currencies that literally do not exist in tangible form, they're digital.  

Alright alright....I can just hear my loyal readers (all three of them) saying:  "Thanks for the history lesson professor, you've told us what crypto currencies are not, now can you tell us what they are".

I can try, but understand I don't proclaim myself to be an expert, however I do think I have a decent enough handle on Bitcoin.

As I concluded at the end of that ham fisted history lesson, Bitcoin and the like are digital.  So it might help to understand them in terms of something else that is digital that pretty much everyone understand, digital pictures.  When you look at a picture on your smart phone you're looking at something that doesn't exist in physical form, its something that is written in digital code.  

Okay okay....I know what you're gonna say.  "Yeah the picture might be digital genius, but I can print it and hold the actual picture in my hand"!!  "How do I do that with Bitcoin"???

The short answer is, you can't.  Well, maybe.....but you might have to chop down a few redwoods for all the paper you're going to consume.  That's because each Bitcoin is line after line, after line after line after line, of encrypted code.  

That's what the blockchain is.  Everyone who touches the coin, every transaction and movement is included.  That's why the so called "mining" of Bitcoin is so expensive, it takes massive computing power and tons of electricity to extract these "coins".

Bitcoin miners all around the world, working as individuals or in teams are trying to unlock bitcoin by solving incredibly difficult puzzles.  I am not a computer programmer, so my explanation is going to fall short of a full and satisfactory explanation.  For those who want to understand beyond my layman's explanation, I'll direct you to investopedia's explanation here:

I am going to add just a bit more, about something else that is essential in the CryptoCurrency equation, something else that is intangible.  That other thing is TRUST.  

For older individuals like myself trusting digital currency is a hurdle.  I grew up getting an allowance, at the risk of dating myself I will tell you how much I got.  Once a week my father would give me a quarter, 25 cents.  He didn't use a smart phone, and there was no electronic transfer of 25 cents  into my account.  I would hold out my hand and be given a physical coin.

Things have evolved since then, I still like having actual physical money in my wallet, but I'm comfortable now paying my bills, my mortgage, and lots of other transactions without ever once touching any actual money.  Each month I transact thousands of dollars in economic activity without once having to hand over something that is physically real.  

The blockchain is what provides this trust for users of CryptoCurrencies like Bitcoin.  I do consider it a leap though for older individuals like myself.  But in another 10 or 20 years?  When debit cards were first introduced a lot of people said they wouldn't use them, and some still don't.  But the world is forever changing and evolving and I'm coming to the conclusion that things like Bitcoin are going to be adopted widely.

I'll have more to say on this later, especially about the market for stocks that are jumping on the CryptoCurrency BlockChain bandwagon. 

Monday, January 8, 2018

Glowpoint Inc - Buying the rumour (GLOW)

Glowpoint Inc is a stock that trades on the NYSE Amex.  I would never have heard of it were it not for a conversation last week with an acquaintance. Someone who travels on the periphery of some pretty deep pocketed and well known personalities, including some in the media.  

The rumour I heard is that Glowpoint may be looking to use its cloud based conferencing technology to get in on the digital currency bandwagon, specifically in the area of blockchain technology.

I don't know whether its true or not, but based on the chart and the increased trading of the past few months, I'm taking a flyer on this one.  

I haven't touched Bitcoin or any of the other digital currencies that have grabbed everyone's attention.  And if GLOW does end up moving into this sector it will be my first time investing in any stocks associated with the broader crypto-currency market.

I'm not concerned though, Riot Blockchain (RIOT) was reportedly a biotech company until a name change this past October.  This whole sector has heated up and there still aren't many publicly traded companies that have moved in. 

We shall see how it works out.  

Sunday, December 24, 2017

A merry and blessed Christmas to all my readers

Greetings of the season, I won't be mentioning any stocks in this Christmas season posting.  I just want to thank all those who've been reading this blog over the past...well its coming up on two years soon. 

I hope that readers have been able to use some of the ideas, information and opinions expressed here to make better investment decisions.  And I pray that 2018 and beyond brings heath, peace and prosperity.  As a believer in the idea of paying it forward I will be making a donation to my church at year's end of $150 which is what was earned by ATB from the ads placed.  I belong to an awesome faith community that does great work in outreach and in helping out the migrant farm workers who come to to my area.

I am a Christian, however it doesn't matter to me what a person's faith tradition is.  My Christianity is about living in harmony with God's awesome creation, and it is through the teachings of my Lord and Saviour Jesus Christ that I choose to try and do that.  I do not always succeed in my efforts, but I do try. 

To those reading, no matter what your faith background may be, and even if you don't follow one, please accept my warmest wishes for this holiday season.  We are all connected, we are all one, and we are all worthy of God's abundant and unceasing love.

Again, a very merry Christmas.

Monday, December 11, 2017

Bullish on Resverlogix? You may want to consider warrants

If you're bullish on Resverlogix as an investment for the longer term, then share purchase warrants may be something you want to consider.  Resverlogix shares trade on the TSX under the symbol RVX, as do warrants under the symbol RVX.WT

I'm assuming most people reading this (all three of you) already know how warrants work.  But for those who don't, or for those who are a bit fuzzy I will explain.  Warrants are basically a futures contract, very much like calls.  They give the holder of the warrants the right to purchase shares at a fixed price up to a specific date. 

In the case of Resverlogix, their share purchase warrants give holders the option to buy shares at a price of $2.05 each and they expire in June of 2021, June 20th to be precise.  Obviously for the warrants to have any value the PPS for Resverlogix has to be trading above $2.05, otherwise there's not much point.  However because they don't expire for another three and a half years, there is the "time value of money" component which adds some value.  

I'm going to demonstrate how warrants can outperform shares using Resverlogix as an example.  The numbers I'm going to use come from the most recent day's trading, Monday December 11th 2017.

If you're going to buy warrants you should obviously be bullish on a company's longer term prospects.  In the case of Resverlogix's warrants, they've got a long way to go before expiry, over three years in fact.  In Monday's trading the PPS ranged between $2.07 and $2.47 so I'm going to pick the mid point, $2.27 and the warrants traded between $0.90 and $0.99 with a mid point of $0.945 so we'll call it 95 cents.

What makes more sense, buying shares for $2.27 or warrants for $0.95?  If you don't expect the PPS to do much, then shares would be the better option.  But if you read Dr. Kideckel's report for Beacon Securities and believe the 12 month price target of $8.55 is achievable, then the warrants are the better option.  Here's a link to StreetWiseReport's story on that analysis.

Resverlogix doesn't even need for its share price to reach that $8.55 target for warrants to outperform shares.  Let's cut that number by more than half, and put it at $4.  

$10,000 invested in RVX shares @ $2.27 per would net 4,405 shares.  At $4 those same shares would be worth $17,620 for a gain of $7,620 or 76%.  Not bad.

$10,000 invested in RVX.WT warrants at 95 cents each would net 10,526 warrants.  At $4 those warrants would be trading "in the money" by $1.95, so they would be trading at least at that price plus a "time value of money" premium.  But to keep things simple we'll simply price them at $1.95 each.  10,526 warrants at $1.95 would net $19,500 for a gain of 95%.  

Who wouldn't want an extra 19% return?  And if Beacon's $8.55 price target is met, then the degree to which warrants outperform shares is even greater.  The shares would be up 277% using a buy at $2.27 as an example.  But the warrants would be up 584% because they'd be trading for at least $6.50, ($8.55 - the $2.05 exercise price).

Options trade just like shares, and just like shares you can either buy or sell them.  If a warrant holder chooses he/she can exercise their purchase option and convert the warrants into shares.  In the case of RVX hitting that $8.55 target price, the owner of 10,000 RVX.WT warrants would contact their broker and pay $20,500 plus fees which would then be forwarded to Resverlogix.  The company in turn would convert the warrants into shares. And those shares would be worth $85,500 at that $8.55 price.

Full disclosure, I own both RVX shares and RVX.WT warrants.  In the case of the warrants I expect I will simply trade them rather than convert if the PPS climbs as I'm expecting.  

For those wishing to do further reading and research, something I wholeheartedly encourage, here's a link to a story from Canada's Globe&Mail, it was first written in March of 2011 and last updated in March of 2017.

Warrants: An investing option that gets no respect

Sunday, December 10, 2017

The China Connection - Pay attention to the details (RVX.TO / CREG / ACST)

Regardless of your opinions of U.S. President Donald Trump, his recent trip to China has coincided with some North American companies releasing news with a connection to the world's most populated country and fasted growing economy. 

I'm going to focus on three such companies: 
  1. Acasti Pharma which trades on the Nasdaq with the symbol ACST.  
  2. China Recycled Energy also on the Nasdaq with the symbol CREG. 
  3. Resverlogix trades on Canada's TSX with the symbol RVX and as RVXCF in the U.S.

Acasti Pharma
They put out news on November 20th announcing a non-binding term sheet with a leading China based pharmaceutical company.  That news sparked a huge rally for ACST which previously had been trading around the $1.30 area on very thin volume, often less than 20,000 shares a day. 

After the news hit volumes exploded with over 20 million shares trading hands the day the news came out.  And the PPS exploded higher as well, reaching a peak of $3.36 inter-day.  Things have cooled off considerably since then however and the PPS has fallen all the way back to $1.64 with volumes having dropped to less than 1 million per day,  most recently falling below 200,000 trading.

While the news seems to have sparked a huge wave of excitement, in the days following I consider it probable that investors paid closer attention to the details.  This is a "non-binding" term sheet, which means it might not even come to fruition.  And the "leading" China "based" pharmaceutical company isn't even named.  

I'm always suspicious of the word "leading", because there are all manner of penny stock companies who refer to themselves as being a "leader" despite the fact that they're only able to stay in business by promoting their company and dumping freshly printed shares into the market.

In a nutshell they signed a deal that may not happen with a company that isn't even named.  I suspect that if the unnamed company hadn't been from China that the market probably would have yawned.

China Recycled Energy Corp
This one was absolutely crazy.  Their stock went from down around $1.20 to over $9 in a two day period that saw over 50 million shares trading.  The reason?  News was released on November 9th about China Energy Investment Corp signing an MOU to invest over $80 billion in projects in West Virginia.

In this case I believe investors got confused, and while thinking they were buying shares of China Energy Investment Corp, they instead bought shares in a completely different company with a similar name.  Think of it as one of those look alike doppelgangers who shows up at a Rock Concert and gets mobbed by people mistaking them for the real deal.  

And as probably should be expected CREG has cooled off considerably from that $9 peak and is currently trading around $3.  

Both ACST and CREG spiked big but pulled back. In both cases I believe a perceived connection to China helped spark a feeding frenzy.   But both cooled off, CREG because the news that sparked the interest was about a different company.  And Acasti because  a "maybe" deal with an unnamed company isn't exactly money in the bank.

Resverlogix however is a different story.  They too announced a deal with a Chinese based pharmaceutical company, but it wasn't a "maybe" deal but rather one that was finalized.  Regulatory approval was given for an $87 million (CDN) investment in this small Calgary Biotech.  And it wasn't with an unnamed company, but with Shenzhen Hepalink, the world's largest producer of Herpain Sodium, a blood thinner.

As with ACST and CREG shares of RVX climbed sharply on the news.  But unlike those other two the gains didn't vanish, in fact the stock kept climbing right into Friday's closing bell.  The $2.20 closing price is the highest RVX's shares have been in the past 6 months.  And comparative volumes were much lighter, instead of 20+ million as seen with ACST and CREG, RVX by contrast didn't even reach 1 million on any single day.

Beacon Securities analyst David Kideckel's buy recommendation and 12 month price target of $8.55 from November 15 was repeated in a story put out by StreetWiseReports.  It highlighted how Dr. Kideckel referred to Resverlogix as one of Canada's most undervalued and impressive Biotechs.

The take away is fairly simple here.  Paying attention to the details often pays dividends down the road.  While its easy to get caught up in the excitement of a stock making unbelievable gains, its probably worth while to take the time to do the required make sure the excitement is based on solid facts, and that you're sure of what the facts are.  

Full disclosure, I have no position in Acasti and no intention of opening one, long or short, anytime in the foreseeable future.  I do own some shares of CREG, however I sold off over two thirds of the shares I was holding before the PPS exploded and then pulled back.  

In Resverlogix I have what I consider to be a significant position and I added more share purchase warrants last week.  

Monday, December 4, 2017

Chinese investment driving Resverlogix's rise?

Shares of Resverlogix (RVX.TO and RVXCF) have been on the move, making a nice climb off recent lows.  After closing at $1.30 on October 31st 2017, it seems the Halloween ghosts and goblins scared the bears away and as of this writing shares are trading over $1.50 for a gain of more than 15% in just the past month.

What's behind it?

Investment from China may be driving some of the interest.  Shenzhen Hepalink is investing $87 million CDN into the company, which takes them to a 43% stake of this Calgary Biotech engaged in the exciting field of Epigenetics.and BET Inhibition.

Resverlogix's lead compound is Apabetalone, and it is currently in a Phase III clinical trial called BETonMACE which is aimed at proving that Apabetalone in combination with Statins will reduce the time to Major Adverse Cardiac Events versus treatment with Statins alone for treatment of patients with Diabetes Mellitus.

$87 million might sound like a lot, even in Canadian funds, but for the founders of Shenzhen Hepalink it probably isn't a huge sum.  Not after that company went public back in 2010, which made Li Li and Li Tan the richest couple in China at the time.  

Shenzhen Hepalink is reported to be the world's largest producer of Heparin, a blood thinner.  

And Shenzhen Hepalink isn't the only big player with a stake in Resverlogix.  Eastern Capital, the investment arm of billionaire Kenneth Dart is also a major holder, along with NGN Capital and the company's CEO Donald McCaffrey.  

In Canada Resverlogix trades on the TSX with the symbol RVX.  In the United States shares trade OTC with the symbol RVXCF.  There may be a lot more upside for RVX yet.  In a recent report analyst David Kideckel of Beacon Securities set a 12 month target price of $8.55 CDN. 

Coverage Initiated on 'One of the Most Undervalued Biotech Companies in Canada

Disclosure, I am a shareholder so view my opinions in that light and verify all information.  Please read the disclaiming statement at the very bottom of this blog site.

Saturday, December 2, 2017

Resverlogix - The importance of image and branding

I just had a conversation on Friday afternoon with Resverlogix's CEO Donald McCaffrey.  I was not seeking to garner any insight into future developments, rather our conversation focused primarily on events of the past seven to eight months.  I called to express my concern about the company's communications and about projecting a positive image to the market. 

My opinion on the prospects for lead compound Apabetalone are incredibly positive.  The company is more than two years into a phase III clinical trial called BETonMACE that is seeking to prove that Apabetalone administered along with Statins (Crestor/Lipitor) will positively impact the time to a Major Adverse Cardiac Event (MACE) for patients suffering from Diabetes Mellitus.  

The trial has already received five positive recommendations from the independent Data Safety Monitoring Board (DSMB) to continue with no modifications while noting no safety or efficacy concerns.

That is fantastic news, and in of itself is reason for me to be very bullish.  There are also trials planned for patients with both Chronic Kidney Disease (CKD) and Fabry's.  Apabetalone could also have application for people suffering from a wide array of conditions including Alzheimer's, Thrombosis and a number of other diseases with arterial components.  The potential here is mind blowing in my view. 

Suffice to say, I'm a bull, but not a happy bull. 

The reason for my unhappiness is a number of communication blunders over the past several months.  I'm not going to go over the issues, I already blogged about it back in October when the PPS had shown surprising strength in spite of those blunders.  For those who missed it here's the link to that post.

RVX.TO climbs 24% in one week despite "Fear Uncertainty and Doubt" or FUD for short

I spoke to the company's VP of Investor Relations about those issues and I was confident that going forward they would be resolved.  It was my sincere hope that there would be no further missteps and that when the company engaged the market that it would be in a positive way that would enhance the brand, not tarnish it.

Then on November 23rd the company announced via their Twitter feed that they had launched their new website.  Obviously like other shareholders and prospective investors, I checked it out. 

To be perfectly clear, I personally would never base an investment decision on a corporate website.  I expect a company to have a website of course, but beyond that I don't care.  With that being said I did like the new look, I see it as much cleaner and easier to navigate than their old site which I considered "too busy". 

But my head just about exploded when I saw that in the upper right hand corner they had a link to a Facebook page for the company, a link that has thankfully been removed.  Why was it removed?  This is the page on FaceBook that was linked up to the new website:

When I saw that I almost immediately sent an email to the company's IR represenatives, and I didn't pull any punches.  Here is an edited version of what I wrote: 

 I noticed the new website and wanted to let you know I think it looks very clean, sharp and professional....well done.

One suggestion however, (I am a pain, I know).  

Up in the right hand corner there's a link to the company's Facebook page.  But as you're probably aware, nobody is updating the Facebook page, I've seen home businesses with nice Facebook pages, while looks like you don't give a rat's posterior about it.  

And if that's the case, no worries.  But if you're going to go the time, energy and expense of sprucing up the corporate website, then why have a link to a Facebook page that makes the company look like its out of business?  

Then again, if your goal is to appear less than professional in the social media sphere, then I would have to say....mission accomplished.

I was not a happy camper obviously, and I subsequently asked when it would be possible to speak with the CEO.   That call, as I noted at the start, took place yesterday (Friday Dec 1st 2017) in the afternoon.  

Mr. McCaffrey assured me that he shares my concerns and that he will be addressing them.  He is aware that Facebook reportedly has over 2 billion active users.  I conveyed to him the view that some prospective investors, in researching the company, they may want to look into how the company presents itself on social media.

I realize I'm not providing much in the way of detail with respect to our  20 minute conversation.  There really isn't much worth sharing, aside from the fact that the CEO asserts that he is both aware of the problems and that he is not happy with the way the company has been communicating in the marketplace.

As a public company Resverlogix, like any other, has a brand and an image.  The company needs its corporate communication strategy and execution to match that of their leading edge science.  I equate it to a race car with an incredible engine that blows the competition away.  On the race track it doesn't matter if the car's paint job isn't the nicest, or if there is a chip in the windshield, what matter is performance on the oval.  

But the public markets aren't a NASCAR track.  And if a company doesn't present itself in a positive and professional manner, then they might not be able to raise the money needed to put gas in the tank and compete.  

The conversation ended with me wishing him a good weekend, with an exhortation to put his boot up the VP of IR's rear end, and I didn't use the words 'rear end' but the shorter three letter version.