Seneca Biopharma Inc (NASDAQ: SNCA) is headed for the top in the market this morning, but with no press releases or SEC filings, the big question is, “Why?”
The gains seem to be related to a proposed merger with Leading BioSciences that investors will vote on this Friday. Here’s what’s going on:
Leading BioSciences CEO Urges Seneca Shareholders to Vote
As mentioned above, a recently proposed merger between Seneca Biopharma and Leading BioSciences is awaiting a key vote from Seneca shareholders. For this vote to take place, shareholders must vote for a reverse stock split as well as the change in control and issuance of new shares.
Should these votes be positive, the two companies will merge, creating Palisade Bio. In the case of a merger, Seneca shareholders will own about 26% of Palisade Bio and enjoy a contingent value right, or CVR, giving shareholders rights to 80% of proceeds from Seneca Biopharma’s legacy assets.
In a recent video, available here, the CEO of Leading BioSciences pointed to several reasons Seneca shareholders should vote for the merger.
In the video, the CEO explained that the merger would be beneficial to Seneca shareholders, who are frustrated with historical stock performance. He went on to explain that through the merger, Seneca shareholders will enjoy ownership in a company with a world-class management team, several valuable assets, and a focus on providing shareholder value.
Moreover, the CEO went on to explain that its team is passionate about driving value surrounding Seneca’s legacy assets.
The Proposed Merger Is Driving Interest
There’s no doubt that the proposed merger is driving interest in Seneca Biopharma stock. This morning, premarket volume is going wild and the stock is up around 15%, following the video by Tom Hallam, Ph.D., the CEO at Leading BioSciences.
These gains could just be beginning.
Keep in mind, when you talk about Seneca Biopharma stock, you’re talking about a stock with 30% short interest. That’s incredibly high and sets the stage for a massive short squeeze.
After all, when heavily shorted stocks begin to tick up in value, those who shorted the stock race to buy shares and cover their positions. This leads to dramatic volume followed by incredible price appreciation, and there’s a strong chance that what we’re seeing at the moment is the beginning of one of these moves.
The Bottom Line
The bottom line here is simple. I’m not sure how shareholders will vote, but the proposed merger is exciting news. Leading BioSciences has a strong pipeline of gastrointestinal drugs and a management team that has a strong history of performance. Moreover, not only will Seneca shareholders receive access to this management team and pipeline, should the merger be approved, shareholders will also enjoy an 80% share in legacy assets, So, you’re really not giving up much here.
Now, I know that reverse splits and the issuance of new shares are never fun topics. However, in this case, a vote for these moves will be a vote for a potentially lucrative future, and investors seem to be reacting to that potential.
No matter how things go, SNCA stock will continue to be an interesting story as we move forward.