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Should I go all-in on this penny stock in a bankrupt company?

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Since 2010, the FDA has withhold the stem cell treatment I need for my joint condition. In 2012, the doctors who invented the cell culturing technology sold it to a publicly traded company called Biorestorative Theraputics (BRTXQ), who intended to pursue FDA approval. The doctors continue to use the technique at a private clinic in the Cayman Islands, where I have been treated with it successfully.

Biorestorative completed a Phase I trial with good results and was approved for a Phase 2 trial in 2017, but since then has been unable to raise the millions in funding needed to begin the trial. It’s unclear why, but I suspect it’s because the economics of regulation will make it very expensive to commercialize the final product, and investors aren’t interested in taking a chance on it when they don’t know that it will work.

In 2020, the company declared bankruptcy and their stock crashed to $0.0001-$0.0002.

I check on the company periodically to monitor its progress toward approval. I’ve also considered investing in its stock, but had not done until a few days ago so despite my belief in their product because I don’t know if the company is viable for the reasons stated previously. In April I noticed their stock collapse and considered buying it, on some level recognizing a potential opportunity, but didn’t because I simply had no clue what I would have been doing, and couldn’t find out much about what was going on with the company. I’m trying not to dwell on not having made more effort to figure it out at the time, because if I had put that $500 in then, it would now be over $10M. 

Last Wednesday night I did my periodic check up of the company on a whim, which led to my discovery of a small community of penny stock enthusiasts going manic over a 1000+% rise in the company’s stock in the last few weeks. In July their largest debt holder, an investment group who believes in the product’s potential, agreed to pay off all their other debt and provide the funding for the Phase 2 trial. I don’t understand the details, but people on the internet seem to think this is a huge, game-changing development. There is a bankruptcy reorganization plan that is expected to be approved Sept 10.

I had several thousand in a Fidelity account that I was waiting to put into gold stocks if I decided that it was warranted, but decided to put it into BRTXQ immediately because it looked like the recent move are based on real, positive changes, and the stock price is climbing radically every day. Fidelity blocked my trade at $0.011, and told me it was because the company was delinquent with its SEC filings, and they consider it too risky for their clients. I scrambled to get funds settled in another brokerage, and the stock almost doubled before I could buy it, but I finally got my shares on Friday at $0.019.

I invested a few thousand $$, which I can stand to lose if this turns out to be hype, but I don’t think it is. I say this because of my first-hand knowledge that the product works and fills a major unmet medical need, which is why investors are stepping up to save the company. There is hype to be sure, including a few social media accounts I found that were set up in the last few weeks on reddit, Twitter, and ihub just to hype the stock, but I don’t think it’s the dominant element of what’s happening.

So while I’m in, I’m not sure I’m in enough. This may warrant a greater risk. If the company achieves its goal of getting relisted and returns to its pre-bankruptcy prices, I could make 100x. I see it as an opportunity to profit from the evil that was done to me.

But the fart remains that I am not an investor nor a financial analyst and just plain have no idea what the Hell I’m doing. I have only ever invested in a small number of things that I know about or believe in. I know nothing about how to judge the stock of a company coming out of bankruptcy. All I know is their stuff works, and will be approved if the trials proceed. I have much more in savings than I invested, but due to circumstances, can’t stand to lose too much if this doesn’t work out.

Here are the notes from my very amateur analysis (formatting copied and pasted, emphasis not mine):

 

To buy, or not to buy?

  • PRO/upside

    • May have tremendous upside

      • The product works

    • The recent recovery seems to be based on actual positive developments,

      • Biorestorative and Auctus have developed an bankruptcy reorganization plan.

        • Supposedly, they will eliminate the debt and fund the trial.

      • The company will be in a strong position.

  • Cons/Risks

    • The whole thing could be some kind of hype scam.

      • Multiple social media accounts set up just to hype it.

        • @WenChunChenn claims to be responsible for the summary posted by mammoth_package.

      • A bankruptcy pump is something that frequently occurs so debt holders can get the most money possible during settlement, so be careful here holding too long. On ihub they are flat out saying they are working on “spreading the word” on Reddit and social media, which is a bit of a “pump and dump” red flag to me. Looks like they have a shit ton of toxic debt and no feasible way to effectively pay it currently (hence the bankruptcy obviously).

        • Yeah but most bankruptcy cases dont have hedge funds bailing funding them out and fighting for them in court. Most bankruptcy plays dont involve biotech stem cell drugs with patents and FDA trials.

    • COULD crash again.

      • THE COURT COULD REJECT THE BANKRUPTCY REORGANIZATION PLAN.

      • The company could continue to have the same financial problems that led to bankruptcy: no investor interest and lots of DEBT. 

        • The trial could fail. 

        • Even if the trial succeeds, the product might not be financially viable due to the economics of regulation. 

    • I JUST DON’T KNOW WHAT I’M DOING.

 

  • QUESTIONS

    • Has its funding problem been solved?

      • Following the Effective Date, the Reorganized Debtor intends to become current with its securities filings, maintain itself as a publicly traded company and seek to become up-listed onto the NASDAQ stock exchange. The Reorganized Debtor will further seek to raise additional financing, pursuant to Section 5.2 of the Plan, to proceed with clinical trials for its ThermoStem™ Program and for BRTX-100 program. 

      • Yes. Autucus is paying off there 15 mil debt and has given them 3 mil to resume there FDA trails”

    • Why were they unable to obtain funding?

Facts

I would like to hear any thoughts you may have on this situation. 

Edited by happiness
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39 minutes ago, Ninth Doctor said:

Why go "all in"?  Throw some play money at it, no more.  If it goes up 100X, then you turn $1K into $100K.  Not bad at all.

He did write, "I have much more in savings than I invested." 

Common advice in cases like this is to not invest any more than you can afford to lose. 

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57 minutes ago, merjet said:

He did write, "I have much more in savings than I invested." 

Common advice in cases like this is to not invest any more than you can afford to lose. 

He (She?) also wrote "So while I’m in, I’m not sure I’m in enough. This may warrant a greater risk. If the company achieves its goal of getting relisted and returns to its pre-bankruptcy prices, I could make 100x."  The thread title asks about going "all-in".  That's what I was addressing.  Common advice, as you say. 

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