StemCells Inc (NASDAQ:STEM) Turns Into A Winner

StemCells Inc (NASDAQ:STEM) is a name that we at Insider Financial have been covering since March. At the time we discussed how the stock had been a disappointment for investors, but that we believed there were more positives than negatives for investors. Then, at the end of May, the company shocked the market with the decision to terminate the Company’s Phase II Pathway Study in spinal cord injury. This was terrible news, but even worse was the decision for the company to wind down its operations. As a result, shares collapsed from $3 to under $1.The decision we had at Insider Financial was what to do next. Luckily, we alerted our subscribers that STEM remained a BUY relating to its intellectual property and as a possible merger candidate for a private biotech looking for a NASDAQ vehicle. Yesterday, we got the answer and the news we were looking for.StemCells agreed to merge with Microbot Medical Ltd from Israel. The plans are for the new company to pursue the development of robotics based medical devices for the treatment of cerebrospinal fluid and gastrointestinal disorders, as well as other conditions. The board of directors of each company unanimously approved the terms of the merger agreement and recommended that its shareholders approve the transaction. Completion of the merger is subject to approval of the StemCells and Microbot shareholders and certain regulatory approvals and customary conditions. In addition, in order to satisfy certain closing conditions for the merger, StemCells will be negotiating reductions in outstanding balances with its creditors. Microbot Chairman and CEO Hal Gadot said:

“We are pleased that this transaction will give us a presence in the U.S. capital markets, and we are very excited to continue advancing the development of our proprietary technologies that we believe have the potential to improve the lives of many patients globally. We thank StemCells for its efforts and contributions to improving human health over the years.”

CEO Ian Massey isn't sticking around as he resigned after announcing the merger. StemCells' CFO and three board members resigned as well. He did have this to say before he left:

“This transaction concludes an extensive search for strategic alternatives conducted by StemCells since we failed to see robust clinical results in our Phase II clinical study of human neural stem cells in chronic spinal cord injury. We believe both our investors and the market at large will see the potential of Microbot’s robotics platform, specifically its catheter and shunt technologies, and will appreciate Microbot’s overall business opportunities and potential.”

We sent out an alert yesterday and told our subscribers that we would be exiting our position at the end of the day and that they should as well book profits. It's why we like to keep our subscribers updated with our newsletter. Staying in StemCells doesn't make sense because of the inevitable dilution that is coming. Microbot shareholders will control the company and we're best off waiting until we see the financials on Microbot to determine whether it's a company worth investing in or not. This is really the reason why shares are off in the after hours and we expect the shorts to be piling into STEM.To get more alerts like STEM and to stay on top of today's hottest small caps, sign up for our free newsletter today. There's no cost and you can subscribe at anytime if you feel it's not for you. However, after one or two winners like STEM, you'll be hooked.Disclosure: We have not position in STEM and have not been compensated for this article.