Why Bionovate Technologies (BIIO) Stock Is a Risky Bet in 2021

Bionovate Technologies (BIIO) stock surged by 38.4 percent on May 3. The stock surged significantly after the company announced that it had applied to list its stock on the Nasdaq Exchange. However, the stock is down 49 percent YTD. What’s the forecast for BIIO stock in 2021? Will it fall more or is it a good penny stock to buy now?

Founded in 2012, Bionovate Technologies is a medical device company. With a strong focus on digital transformation, Bionovate plans to develop an FDA-approved platform of medical devices, mobile apps, and biosensors to turn tests that were earlier only performed in physical laboratories into tests that anyone with a mobile device can perform.

On May 3, BIIO stock surged significantly after the company said that it had filed an application to list its common stock on the Nasdaq Exchange. Nasdaq is the world’s second-largest exchange in terms of market capitalization and it's home to most of the best tech companies worldwide. BIIO stock is up 37 percent over the last month and 851 percent over the last year.

BIIO stock is down 49 percent YTD and 71 percent from its 52-week high. The significant drop is mainly due to a broader sell-off in penny and speculative growth stocks as investors rebalanced their portfolios.

On May 3, BIIO applied for a Nasdaq listing in the U.S. Listing the company's stock is subject to approval depending on a number of conditions, including fulfillment of the NASDAQ Capital Market's minimum listing criteria. BIIO plans to meet all of the relevant listing criteria.

With the listing, Bionovate would enter an important phase in the rapidly expanding global medical device industry. The move to the Nasdaq will improve the visibility and credibility of the company’s shares in order to reach out to a new group of investors. The move from over-the-counter to Nasdaq will also improve liquidity in the stock.

BIIO is a penny stock and none of the Wall Street analysts have provided a forecast for the healthcare company. We also don’t have any reliable earnings estimates for the company.

Currently, BIIO has 45.6 million outstanding shares. The company’s recent quarterly report (ended December 2020) listed dilutive securities that can lead to an additional 26.7 million outstanding shares.

This would mean a diluted share count of about 72.3 million. Based on BIIO’s current stock price of $9.70, this would mean a pro forma market capitalization of $701.3 million for a company that doesn’t generate any revenue.

BIIO stock isn’t a good buy since the company’s financials look weak. In the three months ended December 2020, the company reported a net loss of $32,434 compared to $45,569 in the same period a year ago. Also, the company doesn’t generate any revenues. As of December 2020, BIIO had total liabilities of $451,973 and no cash flow. 

These factors raise serious doubt about BIIO’s ability to continue operations. Penny stocks are more volatile and risky investments compared to large-cap stocks.