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Usually when a company rebrands itself by diving into the digital currency space, the stock waits until after the announcement to take off. In the case of penny stock Bioptix Inc., it didn't bother.
Shares of the maker of diagnostic machinery for the biotech industry nearly doubled in value in the days leading up to Wednesday's announcement that it will now be called Riot Blockchain Inc. and focus on buying cryptocurrency and blockchain companies. After the firm, which is based in Castle Rock, Colo., formally unveiled the change in direction, the shares extended their rally, gaining as much as 17 per cent to $9.50 (U.S.), the highest intraday level since January, 2015. After that spike, the stock pulled back, closing on Wednesday up 1.1 per cent.
Other companies have proven that a move into the cryptocurrency space is often rewarded by investors, at least initially, as the astronomical increase in the value of virtual coins has lured everyone from big banks to startups. Overstock.com Inc. shares rallied after the online retailer said it was starting a digital-coin exchange. Shares of MGT Capital Investments Inc., the cybersecurity firm with ties to controversial anti-virus software developer John McAfee, soared after the company announced a move into bitcoin mining.
Formerly known as Venaxis Inc., Bioptix bought out BiOptix Diagnostics Inc. in 2016, which wasn't the best move, according to chief executive Michael Beeghley, who said the company wasn't in a big enough market and noted its significant cash burn.
"When I got on the board, they had made an acquisition that we decided as a board did not make sense, so we closed that down and then decided to change our focus," he said in a phone interview. "We looked at the sector and said, 'How can we participate in this, and how can our shareholders participate in this very exciting industry that's like the beginning of the Internet?'"
Its first move under the new moniker is an investment in Coinsquare Ltd., a Canadian exchange for trading digital tokens such as bitcoin. Riot is paying a few million dollars for about a 12-per-cent interest in Coinsquare, and has warrants to increase its stake to 20 per cent, Mr. Beeghley said. Next, the CEO is looking to buy companies focused on bitcoin mining, blockchain and security software. He plans to fund the deals with a combination of cash on hand and stock.
"We've had a lot of success taking companies where we have closed down operations and identifying new sectors to invest," said Mr. Beeghley, who became CEO of Bioptix in April. "The most recent is [Polarityte] – ticker symbol COOL – which we took public in March."
Bioptix has already shuttered operations, and is selling its remaining patents and intellectual property to a private company in the diagnostics industry. It will receive an upfront payment as well as a royalty stream that will likely be as much as about $2.5-million, Mr. Beeghley said. Bioptix plans to change its ticker symbol to RIOT. Both the name and symbol change are subject to Nasdaq approval.