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Insmed Incorporated Message Board

  • fudfighter4 fudfighter4 Jun 19, 2013 10:39 AM Flag

    The reason this R3000 inclusion is different

    There are two factors which in conjunction give rise to a current position with INSM rarely seen in a run-up to Russell 3000 inclusion.

    1. The imminent release of Phase III results.

    Far and away the greatest relative increase in the share price of a development-stage biotech usually associated with a single development is that which is driven by the release of Phase III results for the Company's first drug candidate.

    Arikace is the first drug candidate of the post-merger Company. The first Phase III results are due "mid year".

    2. The institutional ownership.

    Companies with such a low market cap that they previously didn't qualify for inclusion in the index wouldn't usually have much institutional ownership. However 70% of INSM shares are currently held by institutions.

    Whereas normally the number of shares required by the agents for the tracker funds is less than 10% of the number held by retail shareholders, in this case it would be over 50% of retail shares at the current share price.

    The agents will realise that unless they buy the majority of the shares they need from institutional shareholders there's no way of predicting how high they will need to take the share price in order to fill their quota.

    The fund managers who currently own those shares will use as a starting point the likely value of the shares in the event that the Phase III results are as strong as is generally expected. The unique nature of that imminent development is such that there is likely to be a considerable difference between the current price and the post-results price.

    Once the fund managers have agreed to sell to the agents at a particular price, one would expect the agents to lose no time in buying however many shares retail holders are prepared to sell for a lower price.

    The "June sellers will price for good news in July" thread has some useful information for those curious as to what the valuation model used by the fund managers is likely to include.

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    • Check out the contributions to this topic of Satltsasw, the self-proclaimed regulatory professional.

      Note that he had zero interest in answering Historian's question - but is now looking for Brownie points for being right if nothing happens with the share price tomorrow.

    • Why wouldn't some institutional holders, many of whom would have benefited from 100-200+% PPS increases recently, be willing to directly trade their shares to book profits while hedging their risk on PhIII and NTM results?

      For example, while searching "Russell inclusion Effect", I've seen a post on Investor Hub (message_id=88789989) showing some enormous volume spikes that left the PPS basically flat for the day.

      • 1 Reply to thisidistakenalready
      • I can't really see how the agents will get the shares they need this time UNLESS there is significant profit-taking by institutional holders.

        But there is no reason for them not to extract the maximum possible price for their shares. In fact they would be stupid not to - as once the tracker funds have got those millions of shares, the float will be reduced by millions of shares.

        A fund manager wishing to replace the shares he's sold at a point when the share price is rocketing ever higher due to the combination of strong Phase III results and a much smaller float will find it an expensive undertaking. This is his big opportunity.

        And one would expect a very small range in the price over the final few days before the shares are transferred to the tracker funds. The price at which the institutional holders agree to sell to the agents is unlikely to be a secret for very long.

    • Fud and your clones - you are clearly harping on this Russell thing for a reason. What is it? Because NO ONE here is investing because of Russell inclusion. You are an idiot if you think this is the case. Well, you are an idiot anyway, this is just more proof.

 
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