Shares of Amyris (AMRS) fell more than 10% again today and have now lost a whopping 44% this week. Investors get it. The third-quarter 2018 operating results described in the recent press release were horrific, thanks largely to a near-total wipeout in licensing and royalty revenue. So why can't Mr. Market let up on the punishment of this synthetic biology stock?
Well, a press release isn't an official report in the eyes of the Securities and Exchange Commission (SEC), as it doesn't disclose anything close to all the details and discussions required by law. It took a couple of days after the press release was issued for Amyris to file its official quarterly report with the SEC -- and investors and Wall Street are concerned with a handful of disclosures.
As of 11:55 a.m. EST, the stock had settled to a 10.7% loss.
First off, Amyris missed the filing deadline by one day. That may not seem like a big deal, but tardiness has become normal for the business. It also filed the first-quarter 2018 and full-year 2017 reports late, in addition to others in recent years.
Second, investors learned the reason for the delay: Amyris couldn't file its quarterly report because it was still negotiating an extension on its secured senior credit facility with Great American Capital Partners. The debt in question has been passed around quite a bit in recent years, with considerable consequences for shareholders.
For instance, the current credit facility was used in June 2018 to repay debt owed to Stegodon Corporation, a paper company created by the founders of $1.2 billion start-up Ginkgo Bioworks, for, it appears, the purpose of acquiring bad debt from Amyris. The start-up had a $20 million partnership with the synthetic biology pioneer, but Amyris only ever received $15 million before the collaboration collapsed, with both sides pointing fingers at the other. That stung shareholders, and the debt, which now bears an interest rate of at least 12.25%, is keeping the wound fresh.
Third, the quarterly report shows that the company is grossly misrepresenting royalty revenues by reporting estimated amounts due as if the money had actually exchanged hands. The press release lists nearly $18.5 million in licensing and royalty revenue for the first nine months of 2018. The SEC filing shows that only $4.4 million had actually been received by the end of September 2018.
In other words, Amyris has overestimated royalty payments by 320% this year -- and that's after reporting only $142,000 in royalty revenue in the most recent quarter.
Given all of the recent disclosures, it makes sense that Amyris stock is having a terrible week. Shares had made tremendous gains throughout the year on the assumption that the new licensing-and-royalty business model was working exceptionally well. Now that Wall Street sees the progress was based on estimates that haven't panned out, the company's market cap is being reset to reflect reality. Unfortunately, that reality could keep getting worse under a suffocating debt load. Investors should not see this as a buying opportunity under any circumstances and should continue to stay away from this synthetic biology stock.