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Stereotaxis Inc (STXS): Stock Swings So Wild, It Should Be Illegal

 August 28, 2013 09:41 AM

The stock market may have been under pressure on Tuesday, but Stereotaxis Inc. (STXS) moved decidedly in the right direction as far as long shareholders are concerned. The medical equipment company stock rose 9.72% on a day that the NASDAQ slumped more than 2%.

Think a move of close to 10% is a giant swing? That ain't nothing – as the saying goes. In early July, STXS was trading for as little as $1.26 and as high as $10.85 on August 6th and then under $4 – again – by August 13th.

Need some Dramamine? If Six Flags Entertainment Corporation (SIX) could make an extreme ride like? We aren't even sure it would be legal or safe.

Oh, Stereotaxis is a healthcare technology and innovation leader in the development of robotic cardiology instrument navigation systems designed to enhance the treatment of arrhythmias and coronary disease, as well as information management solutions for the interventional lab.

[Related -Fabulous Start To The Year]

The stock rocked in late July because the company was "granted 510(k) clearance by the Food and Drug Administration (FDA) to market its Vdrive™ Robotic Navigation System with V-Sono™ Intracardiac Echocardiography (ICE) catheter manipulator in the U.S. This represents the first FDA clearance for the Vdrive family of products, which has been utilized in Europe since 2011."

Board Chairman and Interim Chief Executive Officer, William Mills sees a robust and growing market opportunity for Vdrive™ and V-Sono™ saying, "More than 68,000 ICE catheters are used in U.S. EP labs each year, a number that is growing at an annual rate of 15%."

Now, the stock tanked following Stereotaxis's earnings announcement. A statement like this from the CEO will have that buzz-kill effect. "Finally, we are pleased to announce that we have entered into transactions with each of our existing convertible note holders, which will result in a cash infusion of $8.475 million. While we believe these transactions alleviate our liquidity concerns over the next few months, they do not represent a long-term solution. To that end, we have engaged Gordian Group, LLC, a financial advisory firm with special expertise in banking and advisory services for businesses in challenging liquidity situations, to assist us in evaluating various strategic and financing alternatives."

[Related -An Interesting, Volatile, Whippy Session]

In other words, uh, we could run out of money pretty soon. That's the sort of message that can have a negative impact on a stock's price; hence, the 60% fall.

Based on 2013's cash flow statement, it could take more than two years to burn through the $8.475 million as net cash used in operating activities was $3,294,421. However, in 2012 STXS gobbled up $8,413,216.

iStock doesn't think finding money will be a problem for management with more than 100 patents and FDA approval for Vdrive™ and V-Sono™. The micro-cap company could peel of some patents or team up with a larger player like Boston Scientific Corporation (BSX) and ease Wall Street's money concerns.

Any development regarding a longer-term financing solution could/will be a major catalyst for the stock. With 21% of Stereotaxis float (shares available for trading) sold short, the stock could ignite again. There are only 4.64 million shares in the float and nearly 1 million of them are sold short.

Considering the limited number of shares, it's astonishing that STXS' average daily volume is 1,652,920 shares per day. That means investors/traders turn over the entire market cap once three-trading day. Literally, anything can happen with this stock as you can tell from its recent price history.

Overall: Investors willing to need robotic cardiology navigation systems might consider Stereotaxis Inc. (STXS). Throw out fundamentals and let price be your guide. If STXS can get above $4, then it could stage another dramatic rise; crash below $3.50, look-out-beloooooooow.



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