From the October 31 SmallCap Investor News newsletter:
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New Stock Pick: Nutriceuticals.com - A B2B stock
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B2B (business-to-business) stocks are hot. Chemdex (Nasdaq: CMDX) [B2B for the life sciences industry] is up 153% from its IPO price and has a current market cap of $1.2 billion. VerticalNet (Nasdaq: VERT) [B2B for 51 industries] is up 250% from its IPO and has a current market cap of $1.9 billion. And Internet Capital Group (Nasdaq: ICGE) [Acquires and builds leading business-to-business players in multiple industries] is up an incredible 867% since its August 1999 IPO and has a current market cap of $14.3 billion. It's not surprising that investors are bidding up B2B stocks. Current estimates call for B2B e-commerce to grow from $43 billion today, to $1.2 TRILLION in four years.
Nutriceuticals.com is a new entrant in Internet B2B. The company's goal is to become the premier online business-to-business trade exchange for companies in the Pharmaceutical, Over-the-Counter, Health and Beauty, and Natural Product industries. The company's website (http://www.DrugMax.com) will feature auctions, a wholesale marketplace, classified ads, reverse auctions, and industry news.
Including its pending acquisition of Becan Distributors, Inc., Nutriceuticals.com's pro forma sales for the year ended March 31, 1999 were $31 million. Sales for the year ending March 31, 2000 are expected to double to $62 million. And for the following year, we feel that sales could double once again.
Nutriceuticals.com is currently working on a stock offering which will raise $12 to $15 million and give it a Nasdaq listing. The offering price is expected to be $8 to $10 per share. The company is currently listed on the OTC Bulletin Board with the symbol JCOM, and as of Friday, the price was $5 bid, $6 ask. Adjusting for the upcoming 1 for 2 reverse split, the stock is currently $10 x $12, or slightly above the expected offering price. According to the prospectus, the company plans to change its name to DrugMax.com, Inc. in the near future. It has already applied to have its symbol changed to DMAX. The offering is being underwritten by Kashner Davidson Securities (800-678-2626).
While JCOM is obviously a risky stock, as the company is new to Internet B2B, it will already have significant sales due to the Becan acquisition. And also because of Becan, the company will already have a customer base that can use its B2B services. For many other startup companies, gaining its first customers is a major problem.
If the offering prices at $9, the company would have a market cap of approximately $56 million. Compared to the billion dollar market caps of B2B stocks such as Chemdex and VerticalNet, Nutriceuticals.com certainly has significant upside potential. If the company is successful, it's possible that people who invest now could make many times their money.
If you decide to invest in this company, you need to decide how you want to buy it. If you try to buy it in the open market before the offering, it may be hard to buy many shares without driving up the price since liquidity won't increase until after the offering. Also, until the company receives the money from the stock offering and competes the Becan acquisition, the risk level is higher. But if you plan to buy after the offering, you don't know where the price might be. The price could be lower or it could be significantly higher. Or you can try to buy the stock at the offering price by opening an account with Kashner Davidson and participating in the offering.
Here's the link to the most recent Nutriceuticals.com prospectus:
sec.gov
The offering is currently expected to be completed on November 8 or 9, although that date may change. |
