Universal Bionergy Inc. (PINK:UBRG), Tibet Pharmaceuticals, Inc. (NASDAQ:TBET), and Alimera Sciences Inc. (NASDAQ:ALIM) may be huge winners today, but that doesn't mean they'll be rolling tomorrow. To stay on the bullish side of the fence, eventually, UBRG, ALIM, and TBET are going to have to justify these moves. Here's a closer look.
Universal Bionergy Inc. is more than what the name implies. The company is self-described as "an independent diversified energy company, engages in the production, marketing, and sale of natural gas, oil, coal, and alternative energy". Regardless of the description, UBRG is up 160% today following news of last year's record revenue of $71 million, and this year's expected revenue of more than $200 million. Compared to the company's prior (to today) market cap of $2.4 million. No wonder the stock's soaring. Yet, the complete mismatch between the company's size and the revenue projection should - and does - prompt questions. The first and biggest one is, what's the catch for the screaming on-paper value?
The catch is the business model. UBRG hasn't posted 2011's official (SEC) full-year numbers yet, but we can see enough with the nine-month numbers and last quarter's numbers to see that the gas/energy supplier is consistently losing money on a net basis every quarter. It's not even the loss that's alarming though - it's the 'how' it's losing it. Gross profit margins, or the difference between what it pays for goods and what it sells them for, average about 0.1%. That's about the same as Wal-Mart buying a tube of toothpaste for $9.99 and selling it for $10.00. It can work in theory, but it takes a massive amount of expense control and huge volume to make that viable.
It's not likely Universal Bionergy is going to be able to stay this impressive very long with those numbers.
After a disastrous plunge in November and subsequent dead period between then and now, today's 30% rally from Alimera Sciences Inc. is the most investors have had to feel good about in a long time. Here's something even better though.... ALIM may actually keep in getting traction. And interestingly, there wasn't a news-based prod for the jump - this biopharma stock just changed course for the better, most likely fueled by an aggregation of encouraging news and events from last month and early February. It just took a while to get going. That, or news was leaked. Either way, there's a lot of ground to make up, and something struck a chord with buyers today. All it needed was a nudge,
Finally, today's 140% gain from Tibet Pharmaceuticals, Inc. is clearly something for owners to get excited about. On the flipside, today's big opening gap and pullback from the high is something for TBET owners to be worried about, as it has all the telltale signs of an equally-harsh downside reversal.
TBET soared on news that CEO and major shareholder Hong Yu intends to take the company private. He says he's offering $3.00, yet the stock topped out at $2.36 and then slid back to $1.74. It's not exactly the kind of action one would expect when the market knows it's going to get $3.00... unless the market knows it's just not apt to happen.
Bluntly, the offer from Tibet Pharmaceuticals' head seems a little iffy, particularly given the way he posed it with a bit of an attitude by saying : "In recent days, we noticed that a website mentioned about auctioning our operating entity's assets. These were untrue and incorrect announcements. Our company is in normal business operation. We're conducting our investigation on this mistaken report, and will keep our investors informed on the investigation result.... Company will take all necessary legal measures to defend itself against any untrue reports and to protect the interests of shareholders.... In view of market bias towards Chinese companies listed in U.S. stock exchange and our past stock performance, I hereby make an offer to purchase TBET stocks not owned by me for $3.00 per share in cash... delisting details will be announced shortly".
A little too much protest? Perhaps. Perhaps not. It does seem like a little too much interest in 'proving' the company... the kind we were hearing from Chinese companies' management teams back in 2010 and 2011 before auditors resigned and fraud was confirmed. The jury's still out on Tibet, but it's a strange story so far.