On June 28, Archon filed a 13G on AquaBounty Technologies Inc (AQB) , disclosing a passive 8.39% position. In 2020 AquaBounty is set to sell the only genetically engineered (GE) animal in the world that’s been deemed safe to eat: Atlantic salmon modified to grow faster.
The market for GE salmon appears large, though many remain opposed, calling GE salmon “Frankenfish.”
Apparently Archon Capital believes AquaBounty could successfully commercialize GE salmon. The hedge fund bought 1.8 million shares of AQB between March 31 and June 19 (the event date of the 13G filing), making it the fund’s 16th largest position.
Hedge Fund Archon has been a hot performer.
Archon Capital, with $232 million under management, has been one of the the top performing mutual funds over the last three years. Founder and portfolio manager Constantinos Christofilis has demonstrated a talent for picking stocks in the small cap tech and heath care sectors.
For instance, Archon held an $8 million position in Conformis Inc (CFMS) at Q1 2019 end, making it the fund’s third largest position. Conformis makes customizable hip replacements. First bought in Q1 2018, Archon’s estimated cost was $1.18, according to WhaleWisdom.com. CFMS was the #1 performing stock in the 1st half of 2018, according to Zacks, “skyrocketing about 984%.”
Archon filed 13G on AquaBounty on June 19. Here is the hedge fund’s Q1 2019 holdings (including AQB 13G).
|Stock||Symbol||Shares Held||Market Value||% of Portfolio||Previous % of Portfolio||Ranking||Change in shares||% Change||Change Type||Qtr first owned||source type||source_date||Avg Price|
|Ishares russell 2000 etf PUT||IWM||796,500||121,936,000||32.0943%||23.4594%||1||366,800||85.3619%||addition||Q3 2017||13F||03/31/2019|
|Avon products inc||AVP||12,545,547||36,884,000||9.7081%||7.8532%||2||-126,400||(0.9975%)||reduction||Q2 2018||13F||03/31/2019||1.7808|
|Conformis inc||CFMS||8,170,455||23,531,000||6.1935%||1.1111%||3||560,000||7.3583%||addition||Q1 2018||13F||03/31/2019||1.1897|
|Brightcove inc||BCOV||2,228,764||18,744,000||4.9335%||6.3793%||4||6,280||0.2826%||addition||Q2 2018||13F||03/31/2019||9.0374|
|Agilysys inc.||AGYS||844,414||17,876,000||4.7051%||6.9897%||5||-351,024||(29.3636%)||reduction||Q1 2017||13F||03/31/2019||9.9177|
|Accuray inc.||ARAY||3,195,910||15,244,000||4.0123%||6||3,195,910||new||Q1 2019||13F||03/31/2019||4.77|
|Synchronoss technologies inc||SNCR||2,466,403||14,996,000||3.947%||5.1268%||7||418,580||20.4402%||addition||Q4 2018||13F||03/31/2019||6.1298|
|Stericycle inc.||SRCL||259,003||14,095,000||3.7099%||8||259,003||new||Q1 2019||13F||03/31/2019||54.42|
|Dhi group inc (dice holdings inc.)||DHX||3,848,364||13,084,438||3.4439%||1.9795%||9||581,120||17.7862%||addition||13G||05/03/2019|
|Apyx medical inc||APYX||2,729,626||12,174,132||3.2043%||10||1,202,954||78.7958%||addition||13G||04/02/2019|
|Vericel corp||VCEL||694,459||12,160,000||3.2006%||6.8584%||11||-272,259||(28.1632%)||reduction||Q2 2017||13F||03/31/2019||5.3287|
|Channeladvisor corp||ECOM||998,075||12,157,000||3.1998%||4.6187%||12||0||0.00%||Q4 2016||13F||03/31/2019||11.1312|
|Ezcorp inc class a non-voting shares||EZPW||1,243,196||11,587,000||3.0498%||3.9183%||13||0||0.00%||Q2 2017||13F||03/31/2019||8.3873|
|I.d. systems inc.||IDSY||1,189,424||7,053,000||1.8564%||2.6307%||14||35,160||3.0461%||addition||Q3 2017||13F||03/31/2019||6.5555|
|Domo inc||DOMO||158,725||6,401,000||1.6848%||15||158,725||new||Q1 2019||13F||03/31/2019||40.33|
|Aquabounty technologies inc||AQB||1,812,100||5,653,752||1.4881%||16||1,812,100||new||13G||06/19/2019|
|Cutera inc||CUTR||300,040||5,299,000||1.3947%||17||300,040||new||Q1 2019||13F||03/31/2019||17.66|
|Pivotal software inc||PVTL||232,321||4,844,000||1.275%||1.5485%||18||0||0.00%||Q4 2018||13F||03/31/2019||16.35|
|Onespan inc||OSPN||208,011||3,998,000||1.0523%||1.9485%||19||-161,054||(43.6384%)||reduction||Q2 2017||13F||03/31/2019||13.0748|
|Zix corp.||ZIXI||557,991||3,839,000||1.0105%||3.5856%||20||-976,798||(63.6438%)||reduction||Q3 2017||13F||03/31/2019||4.8127|
|Edap tms s.a. adr||EDAP||993,509||2,981,000||0.7846%||0.7494%||21||0||0.00%||Q2 2017||13F||03/31/2019||2.9084|
Since Archon Capital filed a 13G on AquaBounty on June 28, AQB is up 13%.
AQB appears to be another winning position for the Seattle-based hedge fund. The stock closed at $3.48 on July 3 — up 13% since Archon Capital filed a 13G on AquaBounty. Archon’s cost on its position appears to be under $3.
AquaBounty modifies salmon to “run” year round.
Salmon spawn at certain times of the year. During this “run” a salmon’s growth hormones are more active. AquaBounty’s patented process keeps the salmon’s growth hormone turned on all year long. Genetically engineered salmon grow twice as fast as regular salmon, grow larger, yet consume less feed.
Demand for fish is booming globally. And with many waters overfished, aquaculture — growing fish in ocean enclosures — is increasing. But fish farming has struggled with environmental problems. Beginning with its location in Indiana, AquaBounty says it offers a locally sourced, more environmentally friendly way to produce salmon.
Opponents of GE salmon call AquaBounty’s product “Frankenfish”
While it’s been regulating genetically modified plants for more than 25 years, the FDA had never approved a genetically engineered animal as food before. However in 2015, the FDA approved AquAdvantage salmon, saying the product is “safe to eat.” The next year the Canadian government gave the salmon its stamp of approval, and AquaBounty hit the market there first, since selling a modest 20,000 pounds of its product.
According to an NPR piece, there was, and is, stiff opposition to GE salmon. Protesters sent nearly 2 million comments to the FDA and nearly 80 retailers vowed not to sell it.
On March 8, the FDA lifted a 2016 import alert that prevented AquaBounty’s AquAdvantage genetically engineered salmon and salmon eggs from entering the United States. According to IntraFish, the ruling opened the door for AquaBounty to begin GE salmon production at its Indiana facility.
Ben Klieve, senior equity research analyst, Agribusiness & Food, for National Securities Corp. told IntraFish that meaningful commercialization is “one to two years off.”
“Our 12 month price target is $6.50 (€5.78), which is in excess of the closing price on 3/8/19 of $4.89 (€4.35) even after a 118 percent gain that day,” said Klieve. He also said the FDA announcement removes some of the risk to production and could bring investors into the stock that were previously on the sidelines, and that could continue to lift share prices.
“In addition, we believe that as distribution agreements are announced there could be further upside to the stock from current levels,” said Klieve.
AquaBounty will need to raise more capital in the months ahead to achieve “meaningful commercialization.”
AquaBounty will need to raise more money in the months ahead, and investors will be closely watching the company’s burn rate. However, new CEO Sylvia Wulf appears well qualified to transition the company from a R&D startup to commercial enterprise. At US Foods, Wulf oversaw operation of the $10 billion Meat, Seafood and Produce division of the food giant.
Archon Capital’s 8.39% stake in AQB appears to validate the commercial potential of AquaBounty’s GE Salmon.
Do not construe anything written in this post or this blog in its entirety as a recommendation, research, or an offer to buy or sell any securities. Everything in this blog is meant for educational and informational purposes only. Do your own research before investing and don’t risk more than you can afford to lose. This article expresses my own opinions, and I am not receiving compensation for it (other than from WhaleWisdom). I do not have a business relationship with any company whose stock is mentioned in this article. I or my associates may hold positions in the stocks discussed.