Elite Pharmaceuticals Inc (ELTP)

[no2koolaid]

DSherman, thanks. And how about a little more information to digest?

One of the more humorous statements I see made revolves around how increases in revenues are “not enough” to move the share price, that “no one” is going to buy Elite shares until they have some big announcements.

I cannot even begin to fathom on what level of business knowledge that makes any sense. Actually, it means shareholders did not invest in a company, they invested in a stock. Just another meme stock that has nothing to do with the world of business...like AMC. You know, the near BK business that is closing stores because the business model shifted and they did not. But, hey, all those “investors” do not care. Right! Jumping into some emotionally driven stock that is untethered to such things as revenues and profits does not matter. It is all about momentum. Fine. That is the antithesis of Elite, which is about profitability.

Is it not clear that the basic purpose of a business is to become profitable? That should be clear from any reasonable understanding of business. So, when Nasrat says…

It is my expectation that the next quarter will be within the ballpark of this quarter revenue wise. We are on target to surpass last year's performance. Just to remind you, we went from $7.5 million in revenues couple of years ago to $18 million to $25 million. This year, we are poised to surpass that. However, it seems that our performance is inversely proportional to our stock price. The better we do, the lower the stock gets. In 2018, when the revenues were $7.5 million, and we're operating at a loss, the stock was $0.13. Today with more than $25 million in revenue and profit our stock is at $0.04. It doesn't make no sense.

Yep, that is right, it makes no sense. Still, Elite's share price does not reflect the value of the business. Want an example? Here it is…if Elite’s p/s remains stagnant and its increase in revenues continues on its current pace, its revenues would soon exceed its market capitalization! I am not sure if anyone fully understands how ridiculous that is. It means someone could hypothetically buy all the shares of Elite and own the company and, merely with its revenues, would breakeven year one. Oh, and since their assets are greater than their liabilities, start year two in the money, with a business more valuable than the one they paid for. Let that sink in. Then let’s come back to reality. If anyone does want to buy Elite, a proper valuation would be done to make sure both sides are getting value. You know, like having an appraisal on your house before selling it. It also means that quite literally, a company could offer little Elite, with its puny share price, 10X and think it a steal. And that happens...any doubts, check what happened with Tobira.

But I have more on this subject…

Nasrat then said on the last CC...

In my opinion, on an average to a conservative PE ratio, we should be at least 400% higher than we are today. And this is only on the theory issue. I'm not talking about the SEC. But Marc mentioned few months ago, we have very low debt, we have very solid other fundamentals just on this one of burning, we should be 400% higher than we are today.

Relatedly, on the Q1 CC Nasrat suggested another number, a bit higher…about 20 cents a share.

Actually, in using a common valuation metric, I believe the current share price should be 22-25 cents. Today! Right now! That the share price is manipulated is clear. Since repetition is the mother’s milk of learning, as profits are the mother’s milk of business, there was this I shared before and I do again because it adds to the manipulation argument…

https://www.griproom.com/fun/10-signs-your-stock-is-being-manipulated

This CC had a great deal to discuss and, as I do not wish to conflate key points and confuse readers, I will stick with the share price as my subject and offer one more tidbit of information.

All this “noise” about reverse splits needs to come back to earth. Even if not paying attention to what Nasrat has said before about only doing that to get to the Nasdaq when the share price has grown organically, a reverse on a penny share price lowers the ceiling and puts Elite in jeopardy of having the very manipulation going on follow it to the Nasdaq. Only it would be worse because the prospective ceiling would be lowered and what would likely happen is what happens when reverses occur when businesses are not profitable but are trying to remain listed on a big board. The same forces that have been manipulating put a full-court press on, they would then legally naked short and they do and do and do…well, you know what happens…another reverse and rinse and repeat. My point?

Elite is not going to reverse. Not now, not anytime soon, and maybe not ever. Why is that? Well, that and a whole lot more is for a different day.