Why are people shorting Nano-X?
On September 15, short seller Citron Research offered a scathing “analysis” of Nano-X (NASDAQ: NNOX), a medical technology pioneer who discovered a less expensive way to deliver medical images such as X-rays and CT scans. It’s a “complete farce in the market,” Citron wrote, and “… this action is heading towards zero.” Synchronized with the report’s release, Citron opened a hefty short position to send the company’s shares sinking.
Days later, another underwear, Muddy Waters, accused the company of faking a demo video showcasing its technology. “NNOX almost certainly used the images of someone else’s chest to try and create their ARC [medical imaging] the machine seems real, ”the bear insisted, without any proof.
So what should be our attitude towards these short sellers? Should we ignore them? Or maybe we should love our enemies. After all, we know shorts are always future buyers of our stock. (Even if they don’t want to buy, the brokerage will sometimes force them to buy, on a happy day that we bulls call “short press. “) Also, if we are buyers, we should be happy to get a cheaper price. And finally, every time in a blue moon, the shorts are right and We are wrong – so maybe we should heed their warnings. Let’s examine and see what is what.
How do shorts attack Nano-X?
The main argument seems to be that the company is a fraud. Citron says: “This $ 3 billion company is nothing more than a science project with simple, minimal rendering [research and development], fake customers, no [Food and Drug Administration] approval, and fraudulent claims that are beyond the realm of possibility. Lemon and Muddy Waters compared the stock to Theranos, the infamous healthcare stock that makes it was a fraud.
This is a serious accusation. It’s not just to say that the stock of Nano-X is too expensive or too speculative. These short films claim that the business is a criminal enterprise. Indeed, Muddy Waters, after calling the company a “trash,” said a “convicted felon, who knocked an $ 8 billion market-cap dot-com to the ground, apparently played a role. determining in NNOX’s exit from obscurity and in its massively exaggerated history. the United States “So this is a giant criminal conspiracy?
Of course, criminal fraud does happen. Every Biotech Investor Should Watch The inventor: in search of blood in Silicon Valley. It’s an excellent documentary about the much-loved start-up Theranos and Elizabeth Holmes, the founder of this company. She has more 200 patents to his name. And yet, his device never worked. She was arrested and charged with criminal fraud. And she fooled some very smart people, including venture capitalists who have invested millions of dollars, and her entire board of directors.
It is highly unlikely that is what is happening here. Unlike Theranos, Nano-X actually has many board members with scientific backgrounds. The company’s 11-person advisory board includes a former chair of the radiology department at Duke University and a professor of radiology at Stanford University. On its two boards of directors, Nano-X includes directors of hospitals and executives and former executives of the health sector, a professor of physics, a professor of law, a professor of medical screening, several doctors and the Deputy General Counsel of the Bill and Melinda Gates Foundation.
Nano-X is not Theranos
When The New Yorker Asked Holmes – before she was charged with crimes – the reporter asked her how her device worked. Holmes’ description of the process was comically vague: “A chemistry is carried out so that a chemical reaction occurs and generates a signal from the chemical interaction with the sample, which results in a result, which is then examined. by certified laboratory personnel. “
Compare that to the interview Nano-X CEO Ran Poliakine gave the Motley Fool the other day. It might give you more science than you want to read. But it is clear that man is not a criminal. I would also suggest that Jung-Ho Park, the CEO of SK Telecom, is not a criminal either. SK Telecom has invested $ 20 million in the company and has reached an agreement to distribute 2,500 Nano-X systems in South Korea and Vietnam. Park also sits on the board of directors of Nano-X.
Hitoshi Masuya, the co-founder of Nano-X, has his name on all patents. He is a Japanese venture capitalist who has partnered with engineers from Sony to develop this technology. I find it hard to believe that these Japanese engineers are criminals who took their device to Israel to find another criminal who would agree to lead their vast criminal plot.
While I acquit people, I will also acquit Foxconn and Fujifilm, too much. Foxconn, the iPhone maker, has invested $ 26 million in Nano-X, while Fujifilm is also a major shareholder. These companies are investing in Nano-X not because they want to defraud the public, but because they want to make the machines, and they see huge benefit and huge future profits.
Can Nano-X underperform or disappoint? Of course. It happens all the time in the stock market, which is why venture capitalists and other optimists don’t put all their eggs in one basket. But these shorts make far-fetched accusations without any proof. I don’t just own my shares, I bought more.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a premium Motley Fool consulting service. We are motley! Challenging an investment thesis – even one of our own – helps us all to think critically about investing and make decisions that help us become smarter, happier, and richer.