Short ZOM - meme stock ready to be cut in half again

Havent posted here in a while and have been looking at this as a good short target since Feb. but here’s the low down:

Zomedica is a thinly covered stock that operates in the veterinary diagnostics space. It went from trading at $0.07 (<$100M market cap) in November to $2.91 (~$2.8B market cap) in Feb.

The company just launched its first product. Its consensus rev estimates have come down since late last year. Its bump up in stock price is due to its becoming a meme on retail stock forums. There are basically three big players in that space (IDXX - ~80% market share, HSKA - ~10% market share, ZTS - ~10% market share via Abaxis), and they provide the majority of the bread and butter diagnostic tests in vet clinics. ZOM was trading above HSKA earlier this year. Their focus is on niche markets in veterinary diagnostics. Its hard to see them really having a value that comes close to HSKA, even if they were super successful, got super high adoption etc. Theres only so much operating leverage they can manage and the other players already have decent margins.

Valuation: Probably closer to where it was late last year, ~$100M, plus $174M they raised in Feb while the stock price was high (good move). So the total value is <$300M. Current market cap is ~$950M, so this represents ~66% upside. Due to frothiness I think 50% is a good amount to try to capture. I dont have a time estimate but its dropped significantly over the past couple months. I consider this a low risk short, but it could bump up again. That said its just so over valued that it’d be safe to ride out any volatility.

Risks are primarily volatility. Even if the tests got massive uptake by corporate vet chains thats probably not for a ways out and I dont think its high likelihood. As mentioned the indications theyre going after are just niche things, and the corporates are already locked in to long term contracts with the other three big players in the space.

Would you have hit a short squeeze yet? Stock is up 20% today. Chalk it up to limits to arbitrage.

Not sure what question your getting at. Its a highly volatile penny stock that happens to be trading significantly above its underlying value. Intraday changes like this are common. I’ve recognized this as overvalued since January and been talking about it to my friends since mid Feb. During the past couple months its seen significantly more volatility than 20% (generally over a few days). This all said, nothing fundamental has changed over the past couple days and it remains significantly over valued.

Cool. Did you take a position and can you hold it though? I can find you a whole host of overvalued penny stocks. Now can I or anyone consistently make money shorting? I’d argue you don’t have a long enough short book track record to make single name calls like this. Tell me I’m wrong.

If you can consistently find a “whole host of overvalued penny stocks,” then I’d suggest you start shorting them and keeping track of your progress. Or better yet, post up some of your ideas.

In any case I’m not here to argue about my personal trading or about how to interpret day to day changes in price based on no new fundamental information/news. I came to post an idea and discuss the merits of the idea, not get into a ■■■■ swinging contest about whether I’m allowed to put up ideas in the first place, which it feels like you’re attempting to by stating that I “don’t have a long enough short book track record to make single name calls.” I’m putting up ideas because I think they’re good ideas and to have a public record, and to be able to have other opinions and think through things with other people.

I see this as taking a couple months to play out. We can check back in then to see if I was correct or not. Thanks.

i recall an article talking to me about young kids making millions on penny stocks. what they did was find penny stocks with a lot of volume. they then contact the penny stock if they need a loan. the loan pays them a high rate, and when they are unable to pay, they are paid in shares at a discount. then they sell it. lol

About a month in and the stock down 25%.

grats but personally i dont think its ever smart to short. the economics just never made sense to me. limited upside but unlimited downside.

I remember some guy who shorted a lot (maybe Icahn?) saying he’d seen a lot more stocks go to $0 than he’d seen them go to infinity.

i think he might be right. theres a study on this. i’ll pull it up.
http://csinvesting.org/wp-content/uploads/2017/05/Bessembinder-Do-Stocks-Outperform-Treasury-Bills.pdf
its a bit of a read. let me find a summary

so the issue with this study is majority of all stocks are penny stocks. u aint goign to profit much in a penny stock. aka limited profits. so even though icahn is right, it aint necesaarily profitable to do so!