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Why Nano-X Imaging Stock Fell Almost 15% in September

By Jon Quast – Updated Oct 2, 2020 at 12:29PM

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This pre-revenue company was attacked by short-sellers, but it's not going down without a fight.

What happened

Shares of Nano-X Imaging (NNOX -5.53%) fell 14.7% in September, according to data provided by S&P Global Market Intelligence. But that's not the whole story. The stock price had more than doubled early in the month as the company attracted investor interest thanks to its potentially revolutionary product. 

However, Nano-X stock also attracted some unwanted attention from short-sellers. Two of them alleged that the company is a scam, which sent investors running. The stock collapsed just as quickly as it had taken off. 

NNOX Chart

NNOX data by YCharts

So what

Nano-X says it will be offering healthcare providers a new way to perform medical imaging that it promotes as an improvement upon traditional X-ray technology. The company's stated goal is to make the benefits of medical imaging more accessible by increasing affordability. That's a grand vision, but the company has yet to generate a penny of revenue. 

The device that will in theory perform this upgraded medical imaging is the Nanox.ARC, and the company hopes to get them out on the market in the first half of 2021. Its short-term goal is to deploy 1,000 systems in the second half of next year; longer-term, it aims to hit 15,000 by 2024. The only hang-up right now is it's waiting on regulatory approval. 

On Sept. 15, well-known research firm Citron Research called Nano-X "a complete farce." Another firm, Muddy Waters Research, later agreed, alleging that the company had faked photos and videos, among other issues. These firms say Nano-X doesn't actually have a product, leading Citron to assert the stock was going down by 100% to $0 per share.

These are among the strongest statements these research firms have ever made in criticizing a company, and they sparked the swift sell-off of Nano-X Imaging's stock.

A frustrated man places his hands on his face with a down stock chart in the background.

Image source: Getty Images.

Now what

Nano-X management isn't taking those short reports lying down. On Thursday, it announced that it will be performing a live-streamed demonstration of its product and technology. The event will take place at the annual meeting of the Radiological Society of North America (RSNA 2020), which will be held in Chicago from Nov. 29 to Dec. 5. The stock absolutely soared on the news.

As a method for putting those short-sellers' arguments to rest, a live demo of Nanox.ARC at RSNA 2020 would appear to be a solid move. However, even if Nano-X's device lives up to its hype, the stock remains a risky small-cap bet for investors. The company has no revenue, and needs regulatory approval of its product in order to become a viable business. In other words, investors should remember that proving the legitimacy of its product is important. But it isn't the same as deploying it in the real world.

Jon Quast has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

Stocks Mentioned

Nano-X Imaging Ltd. Stock Quote
Nano-X Imaging Ltd.
$10.08 (-5.53%) $0.59

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