PolarityTE’s sole key asset is a patent application that it acquired for a value of $104.7 million.
Common equity holders are exposed to severe potential dilution, given a capital structure that is saddled with convertibles.
PolarityTE has failed to release its full pre-clinical data, and its planned human trials appear delayed.
The entity has been reverse merged several times into a variety of businesses. We believe PolarityTE is the latest in a series of failed story stocks.
We believe the common equity is likely worthless.
PolarityTE Inc. (NASDAQ:COOL), formerly Majesco Entertainment Inc., is a company that aims to “induce a paradigm shift” in the field of tissue engineering and regenerative medicine. The company was formed via reverse merger of PolarityTE into the publicly traded entity of Majesco, as announced in December 2016. Prior to the merger, Majesco had been focused on the unrelated field of video game publishing.
The public entity has managed to morph into at least 6 different seemingly unrelated companies over the years (Majesco was formerly Spinrocket, which was formerly Connectiv, which was formerly CDBeat, which was formerly SMD Group, according to its SEC page).
We believe PolarityTE is merely the latest iteration in a series of failed story stocks, and that common shareholders are exposed to severe risks.
Prior to its Merger with Majesco, PolarityTE Owned a Single Patent Application
Generally, when we see an entity reverse merge onto NASDAQ, the deal will include a reasonably strong pretense for the value generation potential of the company. Often such a pretense will include either physical assets or a strong intellectual property portfolio. In the case of COOL, it appears the Majesco entity had merged with Polarity in order to take a single, lonely patent application public.
The loneliness of the patent application (and the fact that it was merely an application) was not immediately clear to us from a reading of the filings. At various times, filings indicate that the merged Polarity entity owned a (i) “patented” platform; or (ii) multiple patent applications (as indicated by the “s” at the end of the word ‘applications’). This shape-shifting description is best shown through the December 2016 8-K announcing the merger in which both versions of the story were detailed in the same document: