KaloBios Pharmaceuticals Inc climbed nearly 50% in Friday trading before market. CEO Martin Shkreli has said on Twitter that he will no longer lend his shares to short sellers.
Popular blogger The Fly cited data from Markit to indicate that 49% of KaloBios shares are held in short positions. This means that traders are betting heavily that the stock will go down. But to cover the short, an investor must borrow the stock from someone who is long. It was against this backdrop that Shkreli’s recent tweet sent short sellers scrambling to hedge their positions, causing stocks to skyrocket.
KaloBios has skyrocketed since Shkreli “saved” the company from insolvency by buying a 70% stake. Shares of what was until recently a penny stock closed up 1900% on Tuesday! But many on Wall Street suspect things are too good to be true.
KaloBios is not a story of reversal
Turing Pharma founder Martin Shkreli is the industry’s favorite villain. It is infamous for the acquisition of older drugs and the rising prices. Shkreli came under scrutiny after Turing raised the prices of the antiparasitic drug Daraprim. Some analysts are now worried that the only reason he bought KaloBios was to take Turing public via a reverse merger.
Shkreli laughed at these rumors. He told Bloomberg News that his plans to KaloBios Pharmaceuticals Inc include turning it into a large independent company and developing a drug candidate for chronic myelomonocytic leukemia that does not currently have an FDA approved treatment.
Nothing Shkreli has done so far suggests that he can achieve this. His controversial past would be an understatement. He was fired as the CEO of a company he founded, was prosecuted for allegations of shareholder fraud, and was even accused of harassing the wife and son of a former employee.
Anyone who buys stocks around the current level of $ 26 is betting too much on someone who is more likely to have bad news than to produce an effective cancer drug years away.
The SEC must intervene
Jay Somaney, founder of hedge fund TSG Capital Partners, believes it is high time the SEC intervened to stop “the widespread manipulation of stock prices at KaloBios by new CEO Martin Shkreli.”
Write for the Forbes, Somaney said that Shkreli’s latest tweet “led to the mother of all the short presses.”
“However, the SEC has fallen asleep … as the stock goes to the moon thanks to an ‘investment’ from Shkreli.”
The regulator must wake up for the sake of these unfortunate people KaloBios Pharmaceuticals Inc investors, who are influenced by “rumors / speculations / innuendos”.