From Biotech to Bitcoin: Bioptix Surges on Rebranding

(Bloomberg) -- Usually when a company rebrands itself by diving into the digital currency space, the stock waits until after the announcement to take off. In the case of Bioptix Inc., a maker of diagnostic machinery for the biotech industry, it didn't bother waiting.

The penny stock nearly doubled in value in the days leading up to the company's announcement Wednesday that it's renaming itself Riot Blockchain Inc. to reflect a new focus on buying cryptocurrency and blockchain businesses. After the Castle Rock, Colorado-based firm formally unveiled the change in direction, the shares extended their rally, gaining as much as 17 percent to $9.50, the highest intraday level since January 2015.

Other companies have shown that a foray into the cryptocurrency space is often rewarded by investors, at least initially, as the astronomical increase in the value of virtual coins has lured everyone from big banks to startups. Overstock.com Inc. shares rallied after the online retailer said it was starting a digital-coin exchange. Shares of MGT Capital Investments Inc., the cybersecurity firm with ties to controversial anti-virus software developer John McAfee, soared after the company announced a move into bitcoin mining.

In regulatory filings, the address Bioptix provides for its headquarters is identical to the address of a shipping and mailbox rental company called PostalAnnex, which sits next door to a Blimpie sandwich store in a Castle Rock shopping center. Karen Chase, a spokeswoman for Bioptix, said that the company uses the address for mail, and also operates a small office in the area.

Formerly known as Venaxis Inc., Bioptix bought out BiOptix Diagnostics Inc. in 2016, which wasn't the best move, according to Chief Executive Officer Michael Beeghley, who said Tuesday that the company wasn't in a big enough market and noted its significant cash burn.

“When I got on the board, they had made an acquisition that we decided as a board did not make sense, so we closed that down and then decided to change our focus,” he said Tuesday in a phone interview. “We looked at the sector and said, ‘How can we participate in this, and how can our shareholders participate in this very exciting industry that's like the beginning of the internet?”

Its first move under the new moniker is an investment in Coinsquare Ltd., a Canadian exchange for trading digital tokens like bitcoin. Riot is paying a few million dollars for about a 12 percent interest in Coinsquare, and has warrants to increase its stake to 20 percent, Beeghley said. Next, the CEO is looking to buy companies focused on bitcoin mining, blockchain and security software. He said he plans to fund the deals with a combination of cash on hand and stock. Bioptix had minimal revenue in 2016.

“We've had a lot of success taking companies where we have closed down operations and identifying new sectors to invest,” said Beeghley, who became CEO of Bioptix in April. “The most recent is Polarity -- ticker symbol COOL -- which we took public in March.”

Bioptix has already shuttered operations, and is selling its remaining patents and intellectual property to a private company in the diagnostics industry. It will receive an upfront payment as well as a royalty stream that will likely be as much as about $2.5 million, Beeghley said. Bioptix plans to change its ticker symbol to RIOT.

Related: Bitcoin Name Dropping Revives Market Memories of Dot-Com Mania

--With assistance from Chris Nagi

To contact the reporter on this story: Lily Katz in New York at lkatz31@bloomberg.net.

To contact the editors responsible for this story: Arie Shapira at ashapira3@bloomberg.net, Jeremy Herron at jherron8@bloomberg.net, Dave Liedtka, Randall Jensen