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Patrick Cox Responds to Short Attack on APDN
Posted on November 3, 2015 by Ben Rabizadeh — Leave a reply
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Excerpt of Newsletter from Patrick Cox:
” November 2, 2015
Bear Attack on Applied DNA Sciences (and Patrick) Creates Long-Term Buying Opportunity
Dear TransTech Reader,
Last Thursday was a rough one for shares of Applied DNA Sciences.
No, the company did not release any negative news related to any of its products, nor did it issue a share dilution, or anything else that would have a material effect on APDN’s value.
Instead, an anonymous article was published on the website Seeking Alpha that attempted to smear the reputation of APDN, its management, and our editor, Patrick Cox. If you’d like to read it for yourself, it can be found here.
As a team, we hate having to respond to these types of baseless reports, published via a questionable financial website by an anonymous user hiding behind his computer with little to no repercussions. However, this user has caused severe short-term damage to the company’s share price, and thus needs to be responded to.
First, neither Patrick nor anyone on the analyst team has ever had any direct or indirect financial arrangement with Applied DNA Sciences, or any company in our portfolio. John Mauldin does sit on the board of three companies we’ve recommended; however, we include a disclosure any time those companies are so much as mentioned in our weekly and monthly pieces.
Other than the baseless smear campaign lodged against Patrick, the article covered perceived issues with the company’s technology, management, and fundamentals, among other things.
Applied DNA’s technology is an integral part of the US military’s growing response to the very real threat of cyberwarfare. Before mandating and subsidizing the use of this technology in critical military supply lines, the Pentagon thoroughly tested and validated the company’s DNA biotechnology and the operations by which it is deployed. As such, Applied DNA is a de facto part of America’s military/intelligence network.
Like other defense contractors, we assume that the company is closely monitored by the military to avoid compromising the technology and its use. The lack of openness about the company’s military contracts can be frustrating to some, but it is a necessary part of doing business as a defense industry supplier. More important for investors, it is also a sign that APDN is operating within the military and intelligence industry’s scrutiny and rules.
For anyone that still has doubts about APDN’s tight knit connection to the US military, here’s a document from the Defense Logistics Agency on how it uses APDN’s SigNature DNA marking technology in order to monitor and trace sensitive shipments.
The user went on to attack the company’s technology, calling it “1999 era Chinese technology.”
The Department of Defense requires the use of APDN’s technology in its supply lines in order to ensure that everything from cases of ammunition to PATRIOT missiles end up where they need to be.
The Department of Defense is and has been working directly with APDN to implement DNA authentication as part of its cybersecurity efforts and is routinely at the APDN facilities. If anything had been amiss at the company—let alone if it were a shell company as the Seeking Alpha user asserts—I think someone in the government would have noticed.
Although some of APDN’s investors have been involved with failed companies in the past, particularly Crede Capital Group, this isn’t uncommon in the biotech space. Most companies do not turn into multi-billion dollar firms; many fail and/or sell their intellectual property to other companies. This is the nature of the biotech business… and really, business in general. Many of the world’s richest men have made and lost fortunes dozens of times; it’s what entrepreneurs do!
And although APDN’s financing agreement may seem odd when looked at in the context of a large, established company, APDN is still very small and growing. For instance, the point made by the Seeking Alpha user that CEO James Hayward agreed to a dilutive financing arrangement with Arjent Limited that was somehow underhanded in nature is misleading. Dilutive financing agreements are an integral part of the capital raising process and are anything but unusual— especially for small, publicly traded biotechs like APDN.
As for the attacks on APDN’s fundamentals, all you have to do is look at the company’s audited financial statements to see for yourself. At one point, the user went so far as to claim APDN has “no assets.” That statement is false as APDN has over $14.1 million in assets, compared to $1.6 million in liabilities on its balance sheet. If you want to take a look for yourself, click here
