Acasti Pharma Inc (NASDAQ: ACST) is running for the top in the market this morning. However, if you’re looking for a press release, you won’t find one.
So, what’s the deal?
The gains seem to be the result of an SEC filing yesterday surrounding the company’s strategic process. Here’s what’s going on:
Skip to What You Want to Read
- Acasti Pharma Provides an Update
- Strategic Alternatives Explorations Are Exciting
- Risks to Consider Before Buying ACST Stock
- Final Thoughts
Acasti Pharma Provides an Update
As mentioned above, Acasti Pharma is having a great start to the trading session this morning. The gains come after an SEC filing yesterday through which the company provided an update surrounding its strategic process.
In the filing, ACST said that its management team continues to explore and evaluate a range of strategic alternatives with the goal of enhancing shareholder value. The company also reminded investors that the strategic alternatives exploration is being done with the help of financial advisors.
The company went on to explain that its Board of Directors, management team, and advisers, plan to proceed in a timely and orderly manner. However, there has not been a definitive time table set for the completion of this process.
Strategic Alternatives Explorations Are Exciting
With ACST exploring strategic alternatives, there’s quite a bit to be excited about. For those of you who haven’t followed strategic alternative explorations in the past, what the company is doing is looking for ways to cure its financial ailments. In general, investors hope for one of the following two actions:
- Acquisition. There’s no doubt in my mind that Acasti Pharma is looking for potential suitors for a merger or acquisition. Ultimately, one of the best ways to provide an immediate return of value to shareholders is through an acquisition at a premium. Should this take case, the return on investment will likely be compelling.
- Asset Sale. Another compelling option is an asset sale. ACST has several high value assets. By selling one or more of these assets, it can cure its balance sheet issues, setting a strong financial foundation for future growth.
Risks to Consider Before Buying ACST Stock
Investing is a process that involves balancing risk and reward. The fact of the matter is that all investments will come with a level of risk that the investor should understand and be comfortable with before buying the stock, bond, or other financial asset. In the case of ACST stock, the most significant risks to consider are as follows:
- Strategic Alternatives Risk. Acasti Pharma is in the process of a strategic alternatives exploration for a reason. It is stuck between a rock and a hard place, trying to figure out how to get out. If the exploration doesn’t prove to be fruitful, significant losses may be the result.
- Clinical & Regulatory Risk. Acasti Pharma is a clinical stage pharmaceutical company. This means that the company must perform well in the clinic and gain the approval of regulatory authorities before its pharmaceutical options can be sold. Should a clinical trial fail or regulators see holes in the data, the stock could experience significant losses.
- Penny Stock Risk. ACST is a penny stock, and penny stocks come with increased levels of risk. In particular, most business models represented by a penny stock are unproven, as is the case with ACST. Furthermore, these stocks experience high levels of volatility, making timing difficult.
All in all, ACST is a compelling investment opportunity. Sure, the company is going through some financial struggles, but that’s normal for clinical stage companies.
On the positive side, the company is in late stage development of a cardiovascular drug that has the potential to become a blockbuster. Moreover, investors may not have to wait long for a return of value and then some if the strategic alternatives exploration goes well. While there are always risks to consider, ACST stock is one that’s hard to ignore.