I'm sorry, but these conspiracy theories regarding share price are laughable. What you are stating is a myth perpetuated by people trying to justify why a stock is trading at a certain place. If a fund wants a stock, it will buy it at $4.99 instead of waiting until it is $5. Secondly, positive Phase 3 results are not a given, so in light of that doubt and the massive hit the share price will take if results are poor, the fact that the stock is trading under $5 shouldn't come as a shock to anyone. Most funds wait to buy until AFTER results are released. Look at ACAD and SRPT as two recent examples.
Justleft, here is a solid fact with numbers that kills your incorrect notion: 58% of the shares in ZIOP are owned by institutions. Most of those shares were purchased under $5.
Here's an even better example to debunk your facts: CYTK, which is trading at $1, has 58% institutional ownership as well, and the overwhelming majority of those buys were made over the summer in the 50-cent range.
Rules are made to be broken. If a hedge fund or big institution wants to buy a stock, they will, regardless of its price.
I agree about conspiracy theories - there is no "they." However, you are dead wrong about the $5 threshold. Many, dare I say most, hedge and long/short funds have a sub $5 prohibition. They consider $5 the "penny stock" threshold. That my friend, is a fact.
Brian, I made a similar point a few weeks ago. Many funds are prohibited by charter from investing in equities with a strike of less than $5.00. However, I believe last week's antics have brought this equity to its root drivers: conviction versus fear. That said, the further we go above 5 the more momentum will build as long funds pile on. Momentum will be met by every dirty trick the shorts can conjure up. Management should have "strongly recommended" that the big holders not offer their stock for borrow (including Kirk), but this company has always been run by scientist who don't consider such things and the CFO doesn't have a strong enough voice to get it done. A good bit of this game playing was unnecessary and avoidable, but the science will win in the end.