Warning: Don’t Get Fooled by a Biotech
Welcome to the Schmoozeletter Blog. Your source for weekly water cooler wisecracks from the world of finance. If you have an opinion different than mine or a topic you want to hear about, let me know!
This week, we’re talking about:
Warning: Don’t Get Fooled by a Biotech
I had a totally different Schmoozeletter planned until I got a message from a client of mine about a “potential investment” shared with them from a coworker.
I spit out my coffee reading the email. My jaw hit the floor and my eyes popped out of my head. Luckily, my wife got a picture in real time:
The following is a real email sent from someone presumably using their work email:
TL;DR: I’m bag holding a shitty biotech stock and you should buy it too!
Short answer:
Long answer:
Warning: Don’t Get Fooled by a Biotech
You might be wondering, what in the Jonas Salk is a biotech?
Well, that sounds cool.
Biology is pretty neat. Technology is what gives me all my favorite gizmos.
Maybe you have a background in the sciences, and you’ve come across a public company whose research sounds intriguing.
If this is you:
Then:
WARNING
A biotech like CYDY is trying to get you to buy their stock for one reason. Their goal is to:
Take Your Money
The biotech trap is this:
1. Do some cool science stuff that sounds promising.
2. Convince investors to “get in now” to maybe make it big later.
3. Take your money.
They sell you the dream that they are curing cancer and that they are your winning lotto ticket, then they take your money.
Don’t believe me?
All you need to do is look at the fundamentals.
Let’s start with their most recent SEC filing. This is from Wednesday, April 22, 2026.
Or how about back on Wednesday, April 8, 2026.
You see the big headline circled at the top?
It says, “Hey Securities and Exchange Commission, we are going to sell up to 375 million shares of our stock.”
When a company sells its stock, the company gets the cash. It is a public company, so they can take money from the public by issuing more shares.
And selling selling shares, all else equal, makes the stock price go down. Think of it this way:
How much would you pay for one slice of pizza from a 16-inch pie that is cut into eight slices?
How much would you pay for one slice of pizza from a 16-inch pie that is cut into sixteen slices?
How much would you pay for one slice of pizza from a 16-inch pie that is cut into 375M slices?
So right away, alarm bells should be going off that this stock might not have the greatest chance of increasing in value.
And I’m not saying they’re evil for doing this. I mean… they could be evil, but they do this because they have to.
They have a $33M operating loss from the past nine months. How does a company keep the lights on with expenses of $33M against revenue of $0?
By taking your money!
Every year they will issue more and more shares, or they will go out of business. Check out how their shares have gone up over the past ten years.
The stock price hasn’t gone down because of bad luck; it has gone down due to simple math.
Every year the pizza gets cut smaller and smaller, so people are willing to pay less and less for one slice.
And here is how you know the pizza is getting even more minuscule for years to come:
They are starting Phase 2.
They need to go to Phase 2, then Phase 3, then FDA review, then…
Hopefully some money.
All the while, they will be selling more shares and selling more shares and selling more shares.
You’re not buying a winning lotto ticket; you’re giving them a non-tax-deductible donation.
I don’t want to sound cynical about the research. Hopefully they do cure cancer. But the better investing option is to wait until they are close to the end of the process to buy in, not to get in years before and get diluted to oblivion while risking the likely outcome that they go bankrupt before making it to market.
We don’t know if they’ll ever make any money as a company. We do know that if you buy in now, they will:
Take Your Money
Final Thought
My client assured me this is a good-hearted person who is interested in research and sent the email, and not a Leonardo DiCaprio in Wolf of Wall Street type. The snark level of this Schmoozeletter was toned down by roughly 1,000% with this information.
