<p>Is iBio (NYSEMKT: IBIO) at the forefront of a game changer? Or is this biotech name all talk? This is the question that speculators ask when the IBIO share rises to new peaks. Although the company could potentially take a vaccine on the market for coronavirus from China, it may not be a winning proposal to buy shares at today’s prices.
There are many reasons why. This is not iBios’ first time using a pandemic. As InvestorPlace’s Vince Martin discussed on March 16, the company took a similar step during the Ebola outbreak in 2014. In the same way as today, speculators rushed in and offered shares when the company announced plans to develop an Ebola vaccine.
When this outbreak faded (without the company developing a vaccine) the shares fell back to previous levels. So, what makes this time different? It’s up for debate. By using the past as a prelude, it seems safe to say that iBio will not solve this crisis. Still, with their recently announced advances, perhaps an actual vaccine is just around the corner.
With speculation driving the share price, it is difficult to value IBIO shares. Too little information to make it a purchase. Too much unpredictability for cards. Let’s dive in and see why your best bet is to stay on the side.
What are the odds for IBIO shares?
Determining whether a biotechnological stock is a purchase or a sale is more art than science. Think of it as handicapping. Instead of saying “yes, this stock is cheap compared to peers”, or “growth is not priced in this stock“, calculate the odds if a company’s potential treatment goes on the market.
In some investments, you lose most of your capital. But in others, you see returns well above 100%. Your “winners” surpass your “losers”. But for most investors who do not have a biotechnological background, it is easier said than done. Especially when it comes to IBIO shares.
As InvestorPlace’s Dana Blankenhorn explained on March 16, iBio is not an ordinary biotechnology game. Instead of conducting research and development (R&D), iBio collaborates with another biotechnology company (Chinese-based Beijing CC-Pharming). Basically, iBio has agreed to launch Beijing CC-Pharming’s vaccine, if and when they can bring one to market.
The question is, will this deal lead to a concrete vaccine? On March 18, the company issued a press release “developing proprietary COVID-19 vaccine candidates.” In other words, they may now have the ability to conduct clinical trials.
What does this mean for IBIO shares? The company may have a possible vaccine in its hands. But will it mean a quick approval around the world? It depends on. FDA (Food and Drug Administration) approval is not an overnight process. Still, other countries may be more willing to accelerate commercialization.
Everything around iBio is pure speculation. And with the current valuation, you make a big investment that the latest development is the beginning of something big.
Shares overvalued, but do not bet against them
Given the company’s current market capitalization (approximately $ 123 million) against its existing assets, the shares are overvalued. Still, that does not mean that this stock can not go higher. The outbreak may disappear in China, but things only start in the United States.
In other words, it may take months before we begin to recover from this crisis. Meanwhile, speculators will be looking for ways to play this trend.
As a result, the IBIO share may rise to new highs if the company makes more progress. The stock may return to its previous 52-week high ($ 3.40 per share). They could also climb higher. This is what makes the company a risky short candidate. With so many unknowns, the chance of a short squeeze is very high.
But do not take this as a reason to buy iBio shares. You can buy today at around $ 1.60 per share and see a fast 100% pop. Still, you can not predict the unpredictable. You can speculate, but you really can not invest in this stock.
Stick to the guidelines and look for less uncertain opportunities
As I said above, iBio is too speculative to buy, but too risky to short. If you buy shares, you bet that this company will solve the crisis. If you take the other side, you could end up in a massive card press if the company makes more progress.
The recent breakdown in the market has destroyed the portfolios. But investors have also been given the opportunity to buy high-quality stocks that sell at low valuations.
Do not waste time and venture capital on IBIO stocks and other coronavirus games. Instead, strive for less risky, but high potential purchases that are available in today’s current environment.
Thomas Niel, contributor to InvestorPlace, has been writing a one-share analysis for web-based publications since 2016. At the time of writing, Thomas Niel had no position in any of the above-mentioned securities.