FibroBiologics (FBLG)
Due Diligence — Catalyst Play with Institutional Backing
Catalyst Details
BlackRock Investment
Price Targets
Summary
Overview: $FBLG is a stock that appears to have bottomed out at ~$1.60, an opportunity capitalised on by global investment firm BlackRock which has purchased a huge $2,871,952 worth of shares in the last week. Alongside a SEPA and option awards with exercise prices at $1.94 and $2.381 respectively, there is universal confidence that $FBLG will soon reverse its downwards trend, likely triggered by the upcoming catalyst on the 10th/11th February.
Upcoming catalyst: FibroBiologics has announced that they will be presenting "research & development updates" at an investor conference on the 10th and 11th February, alongside an in-house analyst day. We expect that these developments will serve as catalyst-level news flow, triggering a potential gap up to $3 or beyond.
BlackRock Investment: On the 29th and 30th December, BlackRock purchased $2,871,952 shares worth (at around $2.2 per share) of FibroBiologics. On the 29th and 30th January, there was more unusual activity, perhaps indicating a follow-up purchase from BlackRock as there were large volume spikes on the 1m candles, in tranches of 250,000 and 500,000.
YA II SEPA: Similarly, Yorkville has entered into a $25m value SEPA with FibroBiologics, with rights to exercise their promissory notes at $1.94 (whereas current SP is 1.605).
Employee options: Moreover, the board has been awarded its largest ever option awards with exercise price at $2.41: the CEO was awarded 406,339 shares.
Low downside: With a comfortable bottom seemingly established at $1.50, entry between $1.50 and $1.70 offers the opportunity for investment at very low downside risk, for potentially huge upside. If there is no news from the investor conferences, consider exit.
"Strategy: We believe FibroBiologics is awaiting an appreciation in the share-price, to seize advantage of mentioned capital raising structures when the share-price is more favourable. We believe that they will achieve this in the short-term through releasing catalyst-level news flow. As a result, the risk of dilution (execution of a shelf offering) will continue to increase as the SP rises; this means that an exit strategy is crucial.
Abstract
This due-diligence report is a research project compiled by affiliates of Montgolfier Stocks. Our aim is to provide free and high quality, in-depth, and sourced analysis on potentially grossly undervalued stocks. We aim to be completely transparent in our activities and research, so feel free to ask any questions and pose any criticisms. We view peer review as essential.
This report serves as a hub for information on this potential play, which readers can use to inform their decision making. We strongly encourage all readers to conduct their own due-diligence before making an investment decision.
1. Introduction
FibroBiologics is a small-cap therapeutics company, developing treatments for common chronic diseases with fibroblast cell-based therapies. Recent insider and institutional trading suggests that there are upcoming catalysts, which we expect to be released on either February 10th, February 11th or February 12th, in conjunction with an investor conference and in-person analyst day. They have announced that they will be delivering "research & development updates" .
BlackRock has purchased $2,871,912 worth of shares in the last week alone, and Yorkville Advisors has entered into a $25,000,000 SEPA agreement with FibroBiologics to buy shares at an exercise price of $2.41. Moreover, the company also issued its highest ever option awards to its board members in late December, with an exercise price of $2.381. This suggests that there is universal confidence that the share-price will soon rise to, and probably past, these points.
We predict that the company is awaiting an appreciation in the share-price, caused by catalyst-level news flow. Following this, they will exercise their options and draw on the newly issued shelf-offering to extract as much financial capital as possible while the share-price is favourable.
"RISK WARNING: This stock carries significant overhanging risk of dilution. Whilst we are confident that there will not be dilution until after the share price has run up, we may always be wrong. See Chapter 5 for further breakdown.
2. Upcoming Catalysts
On February 5th 2025, FibroBiologics announced that they will be presenting at the 2025 Bio CEO & Investor Conference on February 10th and February 11th. Simultaneously, they will be hosting an "in-person analyst day" to provide "research & development updates" .
Whilst the third quarter 2024 highlights suggest that they are not expecting any major product developments until Q2 2025, it is highly probable that there has been a significant advancement or discovery since this time, that they will be able to report on. This is common for biopharma stocks, and the reporting of such news can serve as catalysts for major appreciations in the share-price.
Given BlackRock's recent $2,857,912 investment in FibroBiologics, we believe that this is likely the case. As such, we expect there will be a significant appreciation in the share-price when a PR is released in tandem with these events, which will likely highlight the expected "research & development updates" .
3. Market Analysis
3.1. Float Evaluation
FibroBiologics has a float of 56,860,000. Whilst this is not as low as the stocks that we usually screen for in the Montgolfier method, it is still within a desirable range, and considering the context of BlackRock investment and upcoming catalysts, this float is perfectly acceptable. This translates to a market cap of $43,670,000.
3.2. Market Trends
It is also important to note that the share-price has depreciated in the past several weeks, primarily as a result of the announcement of a $25,000,000 SEPA agreement with Yorkville Advisors Global. This SEPA can translate to significant dilution of up to 41,489,581 shares and has consequently impacted investor confidence.
However, we believe that a bottom has been found over the past 2 weeks, with the share-price trading between $1.54 and $1.74 since the 24th January. Consequently, this offers the opportunity for a fantastic buy-in before the short-term appreciation. BlackRock's $2,857,912 at this price seems to confirm this thesis.
3.3. Price Estimates
To get a rough idea of where the share-price could pop following the impending catalysts, we can observe where the share price was trading previously. On December 23rd 2024, when the SEPA was announced, it was trading at $2.274. Before that, on September 30th 2024, it was trading at a high of $4.410, following a rise from $1.65 after they announced that they would be presenting at a conference.
Consequently, we believe that the news will trigger an appreciation to $2.274 on the conservative side, with possible gap-up potential to above $4 (potential for a 150% swing).
| Date/Event | Price Level | Notes |
|---|---|---|
| Current Trading | $1.60-1.70 | Bottom established since Jan 24 |
| SEPA Announcement (Dec 23) | $2.274 | Pre-decline level |
| September 30, 2024 High | $4.410 | Post-conference catalyst |
| SEPA Exercise Price | $1.94 | Yorkville conversion threshold |
| Option Exercise Price | $2.381 | Board confidence level |
"RISK WARNING: Our price estimates are only rough and may be completely off-target. Do not use them in making your investment decisions, only informing them. As always, set your own strategies based on your own due-diligence.
4. Unusual Trading Activity
4.1. BlackRock Investment
Over the past several weeks, BlackRock (which controls $11.01bn in assets globally) has purchased 1,786,195 shares (~$2,857,912) in FibroBiologics.
At the time of purchase the stock was trading at around $2.30. At the time of writing, the stock is trading at $1.63. Consequently, for BlackRock to hold this huge position, they must have reason for their confidence and must subsequently know that they can make a significant return on their investments.
This means that they have confidence that the share-price will rise past current levels, situated around $1.61. This does mean that they could, at any point, decide to dump their shares. We believe that this will be following the investor conference but before the registration of a public offering (for more info see chapter 5).
Moreover on the 29th and 30th January, there was more unusual activity, possibly indicating that BlackRock or another major institutional firm purchased over 1,000,000 shares. This is indicated by the large 1 minute volume candles, which hardly moved the share price, indicating that the purchase took place in dark-pool trading, confirming institutional activity.
| Date | Entity | Action | Amount/Shares |
|---|---|---|---|
| Dec 29-30, 2024 | BlackRock | Purchase | $2,871,952 (~1.79M shares) |
| Dec 30, 2024 | Board Members | Option Awards | Exercise @ $2.381 |
| Dec 20, 2024 | Yorkville Advisors | SEPA Agreement | $25,000,000 |
| Jan 29-30, 2025 | Unknown (Dark Pool) | Suspected Purchase | ~1,000,000+ shares |
4.2. Employee Option Awards
On the 30th December 2024, FibroBiologics reported their highest ever option awards for their board members, at an exercise price of $2.318. CEO Pete O'Heeron , for example, was awarded 406,339 shares.
Given that this was the same day as the receipt of the second $5,000,000 tranche from the SEPA, they knew that the share-price would fall, yet decided to take option awards at this price regardless.
This indicates that they are fully confident that the share-price will appreciate to, and past, $2.318 in the future. When considered alongside the SEPA's exercise price of $2.41 per share, this indicates that company insiders are fully confident that the share-price is due for a massive reversal – likely catalysed by news from the upcoming investor's conference.
It is also worth noting that the CEO owns 6,006,647 shares, meaning that he has significant incentive to see the share-price climb.
5. Dilution Risk
5.1. Shelf Offering
On the 3rd February 2025, FibroBiologics filed a shelf-offering with the SEC to issue up to $50,000,000 worth of shares. Whilst this is initially concerning as it leaves the overhanging risk of dilution, and is thus a risk all investors should bear in mind when making their decision, we believe that this is a part of their overall strategy.
Once the share price has become more favourable, they will draw on the shelf-offering by filing a public or private offering at these higher prices, which will maximise the financial capital they generate, providing them a longer cash runway for future operations.
This means that we would emphasise exit as soon as you believe you have generated enough returns after the news-based appreciation, as the public offering could drop at any time and a steep decline will begin. We expect BlackRock to pursue a similar strategy.
5.2. SEPA
On the 20th December 2024, FibroBiologics entered into a $25,000,000 value SEPA with Yorkville Advisors to sell up to 41,489,581 shares.
$15,000,000 worth of this is being issued in the form of promissory notes, 2 tranches of which have already been issued to Yorkville. The notes are granted at a 6% discount to the 5-day preceding VWAP from the issuance date. As the second tranche closed at around $2.132, the notes are convertible into shares at around $1.974.
The final third tranche can only be funded with the "receipt of shareholders" , meaning the remaining shares included in the third tranche can only be issued with approval from shareholders.
Moreover, there is a maximum of 7,013,635 shares which can be sold to Yorkville (without needing shareholder approval). This means that the looming potential dilution from the SEPA is capped at 7,013,635. If there is further dilution, shareholders will have to be informed.
| Type | Amount | Risk Level | Trigger |
|---|---|---|---|
| Shelf Offering | $50,000,000 | High | After SP appreciation |
| SEPA (without approval) | 7,013,635 shares | Moderate | SP > $1.94 |
| SEPA (with approval) | 41,489,581 shares | High | Shareholder vote |
| Promissory Notes | $15,000,000 | Moderate | 2 tranches issued |
"RISK WARNING: Our evaluation of the risk of dilution is our own. Consider the risk inherent with overhanging dilution and factor this into your investment decision-making accordingly.
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