Platinum Partners Substantial Acquisition in Chembio Diagnostics Inc. Found Significant by TapeBeat.Com Investors

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1 Year Chart Chembio Diagnostics, Inc.

Lawrence Siebert, CEO of Chembio "Possible U.S. OTC approval of this test opens up a new potential market for our products..."

New York, NY (PRWEB) November 22, 2009

TapeBeat.Com has found that Chembio Diagnostics, Inc., is the kind of company that has propelled the TapeBeat porfolio to #1 in annualized returns. Chembio Diagnostics, Inc., with growing revenues and institutional investment has become of increasing interest. According to a recently filed SC 13G form (statement of beneficial ownership) filed with the SEC on November 2nd, Platinum Partners Liquid Opportunity Master Fund bought a new position of 4,096,674 shares of CEMI common stock. This represents 6.6% of all outstanding shares; a significant investment in dollar value and percentage stake in the Chembio Diagnostics. Why would this private hedge fund suddenly take such an interest in a small company like CEMI? We can only speculate, but there are several good reasons why they would take such an aggressive position in this small company. CEMI released third quarter results on November 4th, which showed an increase in net income of 279% over their last quarter, driven by a 29% increase in revenues. Total revenues were $4.36 million for the third quarter, which is a 24% increase over the same quarter last year. This represents a forward looking annualized $17 million in revenue. From this, it is clear that Chembio Diagnostics, Inc., has left the development stage, is profitable, and is currently trading at a substantial discount to its potential.

With greater than $500 million in assets, Platinum Partners runs several successful funds, most notably the Platinum PartnersValue Arbritrage Fund. This fund boasts an impressive 25% annualized return over the last 3 years, putting them in 15th place in returns out of the top 100 hedge funds, according to the Wall Street Journal. Perhaps Platinum Partners based their decision to take a major stake in CEMI due to the inherently low valuation, currently with forward P/E of only 8. Maybe Platinum Partners are expecting the forward P/E ratio to catch up to the industry standard of 35, which would give CEMI a share price of quadruple what it is currently trading. But there may be much more to the story than that: Following a trail of SC13G filings, Platinum Partners Value Arbitridge Fund has taken beneficial ownership in over a dozen companies in 2009. Interestingly, most of these were in Special Purpose Acquisition Companies (SPACs), whose role is generally to participate in buyouts.

This begs the question: Why does a hedge fund who invests heavily in SPACs take a sudden interest in CEMI? The Platinum Partners Liquid Opportunity Fund, which filed the SC13G for CEMI, is a new fund started in June of this year, and to date the Platinum Partners Liquid Opportunity Fund has only stated beneficial ownership in Chembio Diagnositics. When a fund like Platinum Partners takes a substantial interest in an undervalued company like CEMI, the savvy investor pays attention, as we are...

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Written by Joseph Krueger

Position: Long CEMI

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