CHF Solutions, Inc (CHFS)

[value1008]

This morning i spent a few hours trying to figure out the allure of why people are buying CHFS here.

I suppose that big short-squeeze last Nov. 15, 2017, induced by momo-traders and CHFS' very low float, got everyone excited. But those kind of things happen on a whim and, imo, should not be relied on for a serious investment. But as a speculative play that it could happen again on any build-up of an outsized short position, then people are welcome to "go for it." But i certainly wouldn't put in any money you can't afford to lose. Also please be aware that the float is now larger because of the share-offering last Fall after the pps up-spike, and the short interest according to Finviz is down to 14.3%.

As for co. fundamentals, they look rather "thin". The Stanford trial is only beginning enrollment, according to the CEO and CCO. The PR on earnings day and the conf call (transcript is at S.Alpha) make it clear that CHFS is burning cash each quarter and not getting much return for it.

The CFO states that when we ex-out the impairment charge, their quarterly burn rate in SG&A expenses is about $3.3M for both this past qtr and the 4th qtr from 2016. That's $13.2M a year, annualized, in SG&A costs.

Yet their revenues were only $3.6M for the entirety of 2017. What will they make in 2018? No guidance from mgmt. Both the CEO and CFO could only speak of hoping to see better margins "later in 2018" because there's still a lot of inventory to work through created by the previous manufacturer, Baxter.

So it looks like another 1, 2 or more quarters of posting net earnings losses and burning through more and more of their cash holdings. So Price/Book metrics mean nothing here.

Finally, one has to look at the bigger picture about how the market regards CHFS. Surely there must be a sour mood over the fact that older shareholders have been completely wiped out over the past 14 months when the co. did a whopping 1:30 R/S on 1/13/17 and then another whopper R/S of 1:20 on 10/13/17. In other words, if you had 6,000 shares on Jan. 1, 2017, you now have 10 shares--worth less than thirty bucks.

Someone has been selling a lot of shares of CHFS in recent years and CHFS has now had to do two massive reverse-splits just to stay Nasdaq-compliant. Ouch. Speaking of selling shares, go to https://fintel.io/so/us/chfs to see how one Chinese investor (Dr. Li Chiang, of "Boston Biomedical" fame, buying for the "Li Chiang Family," which has only two investments) initiated a 235k-share position, another Chinese group (Choi Ki Yong) increased its million-plus-shares stake slightly by 80k, but other than that, EVERY OTHER INSTITUTIONAL HOLDER has reduced or sold out of its position over the last two reporting periods, especially Iriquois Cap Mgmt reducing from 515k shares to 33k shares, and the virtually unknown fund Trend Discovery exiting out of all 632k shares (after notice of buying that stake on Oct 12, 2017, the day right before the 1:20 R/S).


The co. has been a big diluting machine and will likely need to do another cash raise in late '18 or early '19, unless the medical device market suddenly begins to get really excited about CHFS' products/services.

I really do hope that happens-- i always wish small and large companies the very best if they have a helpful product or service.

Btw, there's one last thing that i don't like which should be mentioned here: the co. did a name-change in May 2017, and that is why most stockcharts on CHFS only go back to Spring of 2017. It seems like a sly way to try to erase their shareprice history and, perhaps, come up with a more "serious" name for their co.:

"Sunshine Heart changes moniker to CHF Solutions, new symbol"
May 23, 2017 7:10 AM ET|About: CHF Solutions, Inc. (CHFS)| By: Douglas W. House, SA News Editor
Sunshine Heart (NASDAQ:SSH) is changing its name to CHF Solutions effective today [...]"

I'm not a shortseller here. But i'd really need to see a change in fundamentals to be a buyer. Sorry to post such a downer message, but i have to call them as i see 'em and also don't want anyone to fall into "irrational exuberance" here (to use A.Greenspan's famous line).