Since updating the BLFS story on March 1st when the stock was trading around $25, the price has fallen around 60% and the entire company now commands a market cap under $500M. Given this recent slump, I will be removing BLFS from my interest list at the end of the quarter.
To highlight the destructive value of their rollup strategy, I thought it would be fun to list the acquisitions since I added BLFS back onto my list in September 2020 when it was a $30 stock on its way to $60 (naturally).
Sexton Biotechnologies – August 9th, 2021 - $40M
Global Cooling Inc. – March 19th, 2021 - $234M
SciSafe Holdings Inc. – September 18th, 2020 - $33M
Prior to starting on this acquisition spree, BLFS had an interesting (though generic) high-margin product on the market that satisfied a little niche. Since embarking on a strategy to become a vertical supplier of all things cold-storage-related, BLFS now trades for less than the market value of all the companies they have purchased over the last few years. Had they done nothing at all, they may have a profitable company with a growing biologics business. They didn’t and now they have quality control and production issues on their freezer segment along with being labeled a COVID name that’s getting sold as the pandemic retreats into the rearview, neither of which was an issue prior to the acquisitions.
Maybe it’s a bit early given the crappy market and the direction of the fed and the growing investor dislike of cash-eating and money-losing companies, but these guys were smart enough to have primarily used their own overvalued shares to make the purchases and thus carry very little debt and will likely be able to weather this downturn without too much difficulty. Perhaps some cutbacks, but nothing too severe.