Plenty of action over at Safety Shot Inc. (NASDAQ: SHOT), which had its first day with less than 10 million shares of volume Tuesday since it popped up over $2 on November 13th. The stock closed above the $4.70 mark for the first time since the move started (a +56% gain), including a +$1.07 (+29%) move Monday.
Tuesday’s 7 million share day closed it at $4.13, with the telltale wide swings of a stock trying to decide which way it wants to break.
Safety Shot the company has attracted the attention of short sellers ahead of its planned roll out of a beverage product of the same name. Safety Shot the drink is billed as a nutraceutical that rapidly reduces blood alcohol content in the bloodstream of the intoxicated, straightening them out and inducing a state of clarity. The bringdown jokes practically write themselves.
Capybara Research was pretty excited to ruin the party with a wordy November 21st report that casts doubt on Safety Shot’s future as a legitimate, operating beverage maker or licenser of IP.
Safety Shot replied Monday by announcing that they had hired The Basile Law Firm, which specializes in action against short sellers, signaling that they aren’t about to let their market be pushed around by some glorified blogger named after a big rat.
The Short Report
The Capybara opinion can be reduced to three key assertions:
- 1) the company’s claims to have a patent on the product aren’t verifiable,
- 2) the sober juice concoction probably won’t work, and
- 3) the people involved are Boca Raton-based stock hustlers with a corporate kinship to Stratton Oakmont of Jordan Belfort / Wolf of Wall Street fame, who have been involved in various court actions that are less than flattering.
Let’s examine these claims in order:
1) The Patent
Capybara’s research team was unable to turn up any patents for Safety Shot’s… anti-intoxicant (?) beverage, or any patents issued to the company or related companies. We had better luck.
The USPTO shows that US Patent 9,186,350 B2, “Composition, and method of using the composition, effective for minimizing the harmful effects associated with individuals suffering from alcohol intoxication” was issued November 17, 2015 to Gregory Blackman, one of the parties Safety Shot’s filings show that it bought the drink IP from in July of 2023 for $200,000 and five million shares of its common stock.
2) The Product
Capybara has its doubts about the effectiveness of this snake oil. The doubts are expressed by un-named individuals who don’t cite any medical knowledge or authority, because they’re bloggers, and we’re in no position to render an opinion about their opinion, because we’re also bloggers.
The patent documents offer some explanation of how and why this product is supposed to work, which we are similarly unqualified to evaluate, but is available to anyone who cares to read it.
Safety Shot (the company) is presently conducting a double-blind, placebo-controlled trial of Safety Shot (the drink). Results are due out in Q1 of 2024, and aren’t to be confused with a step towards any kind of FDA classification as medicine, which isn’t available for nutraceuticals like Safety Shot.
2a) Does anyone actually want this?
Neither Capybara’s work or the company’s literature address this author’s questions about what kind of commercial appeal a rapid antidote to drunkenness could have, anyhow? Americans spent $260 billion on alcohol in 2022, presumably so that they could drink it for the effect… how many of them just couldn’t wait to get back to reality?
Maybe the idea is to keep a couple Safety Shots in the center console in case you have to drive home in a pinch? Drunks aren’t known for their good judgement.
Curious readers will be able to get right-good-rip-snortin’-drunk and see for themselves how un-drunk a Safety Shot makes them when the company begins online sales in December.
Context Insert: The Paper Chase
This author prefers to stay drunk this Christmas, as Jesus intended, and instead seek insights on this company from its cap table.
By the company’s count, there were 41.4 million shares issued and outstanding November 21st, 13 million of them or so issued since June, and enough outstanding in-the-money options and warrants to create another 34.9 million shares on exercise.
Strictly in terms of the equity and math, the shares that will be created by those warrants and options are half of the story, and the company is acting really weird about them. On November 16th, it filed an application to register 11.6 million of the outstanding warrants for sale (well in the money at a $1.40 strike price), only to withdraw the application the next day.[1]
Part of the fight that Basile takes to the shorts on behalf of retail shareholders has to do with something called “toxic dilution funding,” a process that he says is undertaken with “counterfeit shares.” You can read more about it on Basile’s website but in broad strokes a good and experienced lawyer can use US securities law to prevent financiers who are sitting on warrants issued by the company as part of a financing from shorting a public equity into the dirt, while using their in-the-money warrants as a built in cover.
(AUTHOR’S NOTE: Readers with fistfulls of beat up Canadian cannabis and mining stocks who are wondering when we’ll get our own version of Basile in Canada can keep dreaming. Our securities laws are a step behind our branding.)
The SHOT paper set to materialize has the potential to nearly double its float, but if it’s weighing the stock down, someone forgot to tell the market.
Since this move started November 13, SHOT has traded 222 million shares, effectively turning its outstanding shares over six times. Someone’s making this thing trade, and Capybara sneering at the corporate DNA it apparently shares with Stratton Oakmont and Jordan Belfort causes us to wonder… what did they think this was about, exactly?
3) The Operators
In the past 12 months, SHOT has pivoted from selling CBD-based sunscreen and baldness cures to running its own SPAC listing, to this hyped-up hangover cure that sounds like it should be sitting next to the register at a shady gas station next to a strip club. It’s a pure stock promotion, and anyone who bought it thinking the business would ever be anything other than filler for the public equity is… well… smallcap investors aren’t known for their good judgement.
There will come a point that the buying dries up and SHOT collapses under the weight of its paper, but an experienced team that has capital to work with (total exercise on the warrants brings in $17 million or so), can absolutely take this through a few more rounds before it runs out of steam.
The NASDAQ reported a 1.4 million share short interest in SHOT on November 15th, about 1 day’s volume at the time. The next short report (November 30) will be hotly anticipated.
[1] Neither these 11.6 million $1.40 warrants, nor the 2.7 million $0.93 warrants (neither of which are registered to trade) are to be confused with the 933,333 listed-to-trade $8.40 warrants that the company issued with a private placement back in 2020 when it was still called Jupiter Wellness. Those warrants trade as (NASDAQ: SHOTW). At Tuesday’s close, the thinly traded issue indicated that investors were ready to pay $1.48 for the right to pay $8.40 for a share of SHOT, before June 17, 2025, possibly because they ARE confused, and we don’t blame them.
Information for this briefing was found via Edgar, Nasdaq, USPTO, and the sources mentioned. The author has no securities or affiliations related to the organizations discussed. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
