It's a very good point but separate from the main issue at hand which is one of how bad news gets released to the public. If the uptick rule were in place and the drop in pps had been only 50% or only 25% instead of 70% would all be OK ? I don't think so.
The longer a company sits on bad news the greater the chance for investors to find out about it through other more or less reliable sources as happened here. That's what creates confusion, over-reaction for some, and potentially unfair advantage for other investors. No company is going to be criticized for saying, « we received an untitled letter from the FDA (a definitive event that cannot be changed) and we're looking into it; here's how it may impact our product lines; here's what we plan to do about it, etc, etc. »
I agree with you about prompt disclosure. However in this case the untitled letter was received
on a Thursday before a 3 day holiday. The letter was released on the FDA website which was not normal for an untitled letter. The nature of the letter was a question on a previously approved manufacturing process and undoubtedly caused confusion at the company.
Wanting clarification before releasing a press statement would need contact with the FDA, and their own attorney. I do not think that releasing a press release during the first part of the following week was undue delay.
I would like to examine the trades for number of long sales and short sales. I believe the decline would have been limited if an uptick rule had been in place. If you look at the news releases you will find that they were indicating that MDXG was manufacturing an unlicensed drug and were doing a highly illegal thing for which the company would be destroyed and stock value would go to zero.
Hedge funds and short trade houses utilize these type of scare tactics and hide behind free speech.
I think it was a planned shake down of a very successful company ( look at their Q/Q sales).
They got the letter on the Friday before Labor Day weekend and disclosed it Tuesday. Seems reasonable time to respond considering FDA had already reviewed the essentials for Amnio/micronized with no negative findings....only to do a 180 degree switch in this letter. Management shouldn't have time to review with the FDA...really?? Its not like a biotech company that just found out Phase3 results failed to meet endpoints. Further, if management then reiterated guidance and then do in fact meet it, its hard for me to see what damages one could claim other than investors (former) who over-reacted, because they just didn't do their original due diligence properly. All companies have investment risk but we are still in the early innings here of this story and those that over-reacted will be kicking themselves.