Revelation Biosciences Up 63% On 20x Trade Volume – What’s Going On?

Tim Worstall
Updated: 23 Feb 2022

Key points:

Revelation Biosciences (NASDAQ: REVB) stock is up 63% this morning premarket. There’s no specific revelation of a piece of news to drive this. Our assumption, unless and until there is that more news, is that this is driven by a revaluation of the company’s prospects. This does happen, the collective view changes and therefore so do prices.

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Revelation Biosciences is a clinical-stage biopharma company, working on respiratory viruses. Yes, including our friend covid. This does make interest in Revelation at this late stage of the pandemic a little odd but it’s worth noting that the American attitude is still a little more worried than that here in Europe.

That background of working on respiratory viruses is what explains Revelation’s float via a SPAC this year. The speed with which a SPAC can be done as opposed to an IPO made it the obvious choice – seize the day and all that. Not that the SPAC merger has done much for shareholders of course, given the starting price of all SPACs of $10 the actual $8 and change float wasn’t impressive. It also only took a month – ish – for the price to decline down to about $1.50. The recent bounce, that 63% today, does need to be seen in reference to that performance.

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There’s also been a capital raise – already since the SPAC merger – of near $8 million. That was done at $3 a share plus the warrants meaning that there’s been dilution of the extant shareholders already. This isn’t the careful and constrained management of the corporate capital base we might like to see.

But what we’d like to know is why is the Revelation stock price leaping today? There’s no particular news out there, the FDA hasn’t just announced anything. It is true that average trading volume was around the quarter-million mark and is now approaching 5 million. That’s that around 20x increase in trading volume.

A reasonable assumption is that attention has just turned to Revelation Biosciences. It can take time for a new market entrant to gain such attention. Just last week Roth Capital commenced coverage with a target price of $12 for Revelation. It takes time for such information to soak into the market hive mind and that could be it.

It’s also true that the free float at Revelation is now large. Therefore any movements in interest in the stock are going to be leveraged up into larger price movements.

All of this then gives a useful indication as to what the trading strategy should be. Long-term movements and valuations are going to be determined by FDA approval – or not – of any of the company’s products. That’s just what happens in biopharma research stage companies. In this shorter-term, the low float and novelty of the company on the public markets are likely to lead to continued volatility in the Revelation stock price. Any trading strategy, therefore, depends, in the absence of hard news, on being on the right side of that volatility.

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