Novo Integrated Sciences (NASDAQ: NVOS) stock is up some 140% over the past couple of days. It’s rare that we’re entirely categoric around here, we know that it’s all too possible to fall into error. However, this is one of those opportunities that we’re not willing to touch with your bargepole let alone our own.
A barge is a river or canal boat, a bargepole is the long, 8 to 10 foot, pole that is used to propel it along by pushing on the bottom of the river or canal. In English English “I wouldn’t touch that with a bargepole” means that I wouldn’t even touch that with a very long stick. And of course this effect is doubled by insisting that I’d not touch it with your bargepole let alone my own. The “Matey” is just there for effect. What the headline as a whole means is that we’d not go anywhere near this stock.
On the grounds that what the company is proposing is - to us at least - several variations of advanced fee fraud. Note that we are not suggesting that the management of the company is fraudulent, only that they seem hopelessly credulous. As if they’re standing on a street corner holding out the corporate wallet and saying “Help yourself”. This is not what we want from people with a fiduciary duty over our money.
Novo Integrated Sciences stock price from Google Finance
The base Novo business: “Novo Integrated Sciences, Inc., together with its subsidiaries, provides multidisciplinary primary health care related products and services. It operates through two segments, Healthcare Services and Product Sales. The company offers physiotherapy, chiropractic care, manual/manipulative therapy, occupational therapy, eldercare, massage therapy, acupuncture and functional dry needling, chiropody, stroke and traumatic brain injury/neurological rehabilitation, kinesiology, vestibular therapy,” And, well, OK. We’re not particularly fans of some of those types of medicine but it’s amazing what you can sell to people. We’d also note that the business isn’t doing very well but that’s something that afflicts many.
What has us gasping, then running for the hills, is the list of deals that they’re proposing to get involved with: “As previously disclosed, Novo entered into a share purchase agreement (the "SWAG Agreement") with SwagCheck Inc. ("SWAG") and the shareholders of SWAG, pursuant to which Novo agreed to purchase 100% of SWAG’s outstanding shares. SWAG holds a specific right of purchase of a precious gem collection as provided for in an agreement between SWAG and a Court-appointed Successor Receiver for the United States District Court for the Central District of California.” What? Health care clinics are going to buy a batch of jewels? Through a company called, of all things, SWAG? (In English English this is slang for “money or goods taken by a thief or burglar.” In a cartoon the house thief might be seen climbing down the drainpipe with the bag over his shoulder marked “Swag”).
Then there’s this: “As previously disclosed, Novo entered into entered into a securities purchase agreement with RC Consulting Group LLC in favor of SCP Tourbillion Monaco (the "Buyer"), pursuant to which the Company issued an unsecured 15-year promissory note to the RC Noteholder (the "RC Note") with a maturity date of April 26, 2038, in the principal sum of $70,000,000, which amount represents the $57,000,000 purchase price plus a yield (non-compounding) of 1.52% (zero coupon) per annum.” 15 year unsecured money at one and a half percent? No, doesn’t exist. “The RC Note is unsecured and there is no provision for the conversion of debt, issuance of any class of shares, or the grant of any warrants by the Company to the Buyer. The Company is expecting to receive an initial draw against the $57,000,000 in the near future.” No, we do not believe this. There are no circumstances under which we would believe this. As with the SWAG deal we would insist that someone, somewhere along the line, is going to ask for an advance fee to unblock or deal with some little problem. And that would then be the end of the negotiation - the aim and point being the extraction of that advance fee, not the contract about gems nor 15 year unsecured money.
There is also this: “Also as previously announced, the Company has a funding commitment for a direct investment in the Company of $40,000,000 from Sheikh Khaled bin Mohammad bin Fahad Al Thanayan through Gulf International Minerals and Energy Group (GIMEG). The funding is expected to result in project-specific joint ventures for development of elder care and senior living community facilities in Canada.” That’s not so obviously ridiculous but we’d very strongly suspect it’s along the same lines.
One of us here has given expert evidence in a series of financial fraud trials. Also seen off a number of advance fee frauds over the decades. We would emphasise again that we are not insisting, we are not being categoric here. We acknowledge that it is always possible for us to be in error. But it is our very strongly held opinion that these are “deals” intended to drain money from the corporate treasury at Novo Integrated Sciences. That management is entertaining them - on the basis that they believe them to be realistic, of course - is a great big flashing red warning light.
We’d not touch this with your bargepole let alone our own.
