ONTX Stock: Here’s Why Onconova’s Flying

Onconova Therapeutics Inc (NASDAQ: ONTX) is headed for the top in a dramatic way for the second consecutive trading session. The gains are happening for three reasons:

  1. Balance Sheet. ONTX announced the closing of an offering yesterday that shores up one heck of a balance sheet. 
  2. Presentation. The company is also taking part in the 2021 BIO CEO Investor Digital Conference. Investors are awaiting the presentation and results of the conference.
  3. Short Squeeze. There seems to be a short squeeze in the making here.  

Here’s what’s going on:

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Onconova Therapeutics Completed a Fund Raise

In a press release yesterday, Onconova Therapeutics announced that it had completed a fund raise with gross proceeds of $28.75 million at $1 per share. While the dilution upon the announcement of the fund raise was painful, investors are excited now. 

As a clinical-stage oncology company, ONTX needed this funding to continue the development of promising cancer treatments. Now, with a massive amount of fresh money on the books, the company has all the funds it needs for quite some time. 

As a result, investors see an opportunity as there’s little chance of continued dilution ahead. 

Investors Await Presentation Results

Perhaps more importantly than the fund raise, ONTX is taking part in the 2021 BIO CEO Investor Digital Conference. The conference started on February 16, and will end today, February 18. 

During the conference, Senior Vice President, Avi Oler, will be conducting meetings with potential development and investment partners. These meetings could open very exciting doors, and investors want to know how they’re going. 

Moreover, the CEO of the company, Steven Fruchtman, will be presenting at the conference. In fact, he’s scheduled to present today, with that presentation being recorded and available on the company’s investor relations website tomorrow. 

The presentation is bound to be an interesting one, giving investors further insight on how its technologies that disrupt cancer cell growth are moving along. 

A Short Squeeze Begins

This could also be the beginning of the next big short squeeze. Members of the Wall Street Bets Reddit have proven what retail investors are capable of in the stock market if they ban together. Moreover, members of Reddit have announced that they will be going after hedge funds that attack biotechnology companies with short positions. 

This all makes ONTX a perfect short squeeze target. 

Not only is Onconova Therapeutics a biotechnology, the company is working to find solutions for patients with cancer, one of the most dire conditions known to man. As such, there’s a bit of a philanthropic effort on the part of Wall Street Bets Redditors, and that effort would be well served with a highly shorted cancer treatment development company. 

Oh, and did I mention that ONTX is heavily shorted?

At the moment, 22% of the volume in the stock is sold short. That’s a painful percentage and opens the door to squeeze these shorts out of their positions. At the same time, there are only 215 million shares of the company in its public float. With yesterday’s volume being more than double that, it’s easy to see how a supply and demand issue could send the stock flying if retail investors were to move forward with a short squeeze on the ticker. 

What Analysts Think About ONTX Stock

There’s not much to talk about by way of analyst opinions when it comes to Onconova Therapeutics. In fact, only one analyst is covering the ticker. 

That analyst has a Buy rating on the stock with a price target of $0.46 per share. However, it’s important to remember that this opinion is outdated. Considering recent events, I’m expecting a price target increase upon re-review. 

Risks to Consider Before Buying ONTX Stock

If you’re going to buy ONTX stock, you’re going to have to be willing to accept risk. It’s all part of investing, no matter what you invest in. When it comes to Onconova Therapeutics, the most significant risks to consider include the following:

  • Clinical Stages. Onconova Therapeutics is a clinical stage biotechnology company with a focus on oncology. Should a clinical trial go wrong, we could see significant declines in the value of the stock. Moreover, once all clinical trials are complete, regulatory agencies must give their stamp of approval before the company’s products can be sold. Should regulators find the slightest hole in the data, they will reject commercialization applications, leading to declines in the value of the stock. 
  • Capital Risk. For now, capital risk isn’t a huge deal. The company just raised $28.75 million. However, down the road, it may become something to think about. At the end of the day, with nothing by way of revenue, the company must survive on the money it has on its balance sheet. If it’s unable to do so, it will likely issue new shares in an attempt to raise funds, resulting in the dilution of existing shareholder value. 
  • Penny Stock. As a penny stock, an investment in ONTX comes with increased risk. Not only are penny stocks known to experience high levels of volatility, they generally represent companies that don’t quite have a proven business model, making penny stocks highly speculative bets. 

Final Thoughts

Although there are risks to consider before diving into Onconova Therapeutics, there are risks to consider before making any investment. The fact of the matter is that at the moment, this stock is exciting. 

Investors are expecting positive news when the presentation becomes available. At the same time, data is expected soon, and there’s potential for partnerships to come of the investor conference. Not to mention the fact that retail investors seem to be banding together and getting involved here. All in all, these are exciting times for ONTX stock. 

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