Safe Stitch Medical, Inc. (OTCMKTS:SFES) Suddenly Attracts Attention
Although therapies of all sorts gathered attention for their respective penny stocks, Safe Stitch Medical, Inc. (OTCMKTS:SFES) is somehow late to the game. The ticker went active only in the past week, with record volumes logged in a row. We have not intercepted a promotion, and according to experts, a probable cause for the rise in the stock is the possibility of an acquisition. SFES corrected by 9% to 59 cents. 
The company has taken up a serious business with a potential to continue, creating a series of products for stomach stapling surgeries. SFES has to rely on the following financial resources to expand its business of anti-obesity surgeries:
- $275,000 cash
- $2.06 million current assets
- $2.1 million current liabilities
- $35,000 revenues
- $6.6 million operating loss
The company seems to be still in development, and so far accumulating significant losses. The company is still presenting its solutions on medical conventions, and is yet to achieve a stable distribution.
Still, in March the company attracted private investors, with Philip Frost from Opko Health (NYSE:OPK) buying shares worth $500,000. The chairman of SFES Jane Hsiao bought 4 million shares worth $1 million. So far, it is unknown if these holdings may find their way onto the market, but the insiders have an incentive to hold onto their shares and make the company grow, and perhaps revisit an even higher share price.
Since the activity of Opko and SafeStitch are in similar medical areas, the potential synergies may suggest further buyout activities. But at around 60 cents, SFES is accessible enough also for speculative investors, who may tire out of waiting for the white knight to buy up the company. On the plus side, SFES has a relatively stable business that does not rely on a breakthrough. Other biotech companies with big promises fail and lose positions as soon as enough investors realize the promises may not materialize soon.
The next few days will show if SFES is sustained by more than sentiment. Another penny stock, Lot 78, Inc. (OTCMKTS:LOTE) started its climb also with the potential of a buyout, but this turned out to be just one of the many publicity tricks surrounding the ticker. Currently, LOTE is above $9, but is awaiting a sharp correction.
SFES may also be carried forward by promotional efforts, so it is best to stay away unless you can afford to lose a large part of your investment.
