Check Cap Ltd (NASDAQ: CHEK) is screaming for the top in the market this morning, squeezing the shorts out of their positions. If you’re digging for press releases or SEC filings that dropped today, you’re not going to find anything. Nonetheless, there is a good reason for the short squeeze. Here’s what’s going on:
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- Check Cap Receives an Extension From the Nasdaq
- What Is Check Cap?
- What Analysts Think About CHEK Stock
- Risks to Consider Before Buying CHEK Stock
- Final Thoughts
Check Cap Receives an Extension From the Nasdaq
In an SEC filing, dated December 30, 2020, Check Cap announced that on December 29, 2020, it received a letter from the Listing Qualifications Staff of The Nasdaq Stock Market. In the letter, the Nasdaq notified the company that it has been granted a 180-day extension to regain compliance.
Due to the extension, CHEK now has until June 28, 2021 to reach and maintain a minimum bid price of $1.00 per share for continued listing on the Nasdaq Capital Market.
What Is Check Cap?
Check Cap is committed to the prevention of colorectal cancer through proper screening. However, there’s an issue with screening as we know it today. Ultimately, there is quite a bit of preparation that goes into the screening process, and screening is invasive.
That’s why a large percentage of consumers avoid screening, even though catching polyps early will greatly reduce chances of developing this highly invasive cancer.
To combat this issue, CHEK developed a product known as C-Scan. C-Scan is a non-invasive capsule that travels through the colon, screening the patient without causing any pain or discomfort. Moreover, no preparation is needed, making it the easiest way to go about colorectal cancer screening.
What Analysts Think About CHEK Stock
According to TipRanks, there is only one analyst that’s currently covering CHEK stock. Nonetheless, that analyst has an overwhelmingly positive opinion.
In fact, the analyst that’s covering CHEK rates the stock a Buy with a price target of $1.50. Considering the fact that the last close was at a price of below $0.50, that price target represents the potential for gains in multiples.
Risks to Consider Before Buying CHEK Stock
When you invest, you make the decision to accept risk. It’s all part of the process. Before investing in CHEK, you should consider the following risks:
- Delisting. At the moment, Check Cap is facing potential delisting from the NASDAQ. If this happens, liquidity will go out the window, and fund managers will need to sell shares, leading to significant declines. However, this risk is relatively minimal as we are very early in the process and the company has several options to remedy the compliance issue.
- Penny Stock Risks. CHEK is a penny stock. As such, the company’s business model has not yet been proven. Moreover, the stock is riddled with volatility making it difficult to choose the best time to enter, or exit a position.
- Regulatory Risk. While C-Scan has been approved in Europe, it is not yet available in the world’s largest market, the United States. As such, the company must properly navigate the regulatory process. Should the FDA find any issues with the product through this process, significant declines will likely be the result.
It’s clear that a short squeeze is taking place today, and there may be more room to run in the squeeze. However, I’m not interested in the short term. The long term potential here is incredible.
Think about it, colorectal screenings are avoided by the masses. However, they are a must considering the fact that they can help prevent consumers from getting one of the most invasive cancers known to man. C-Scan takes the pain out of colorectal screening, and if it hits the United States, it will probably sell like candy. As such, this is a strong long-term play and one to consider buying into once the profit takers are done at the end of this squeeze.