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Insmed Incorporated Message Board

  • fudfighter4 fudfighter4 May 10, 2013 1:35 PM Flag

    Will this Russell opportunity go begging?

    Here are the numbers from the day of Insmed's Russell 3000 delisting last year.

    About a minute before the close of normal trading for the day the Nasdaq site showed total shares traded of 232,257.

    Transactions relating to the shares released by the tracker funds were subsequently registered - resulting in an additional 7,146,669 shares traded by the end of the evening.

    My gut feeling at the time was that the tracker funds could not have been holding 28% of outstanding shares - rather that each share released by the funds was counted twice, the sale by the fund to the agent, followed by the sale by the agent to a waiting buyer.

    But it's difficult to see how the tracker funds could not have been holding at least 3.5 million shares - corresponding to a free-float-adjusted market cap at the end of May the year 2011 of around $247.7 million.

    If the closing price on May 31 this year is $8.50 Insmed's free-float-adjusted market cap will be around $255 million, and the tracker funds will need to buy back at least 3.5 million shares.

    But this year there are only around 10 million shares in the hands of retail investors, very few of whom one suspects will be sufficiently naive to sell their shares for much less than their likely value after the Phase III results have been released.

    The opportunity is obvious. All a big buyer monitoring the situation need do in order to bank a substantial profit in a few short weeks is to buy enough shares to drive the share price substantially higher by the end of May. A share price of $12 on May 31 would require the tracker funds to acquire over 5 million shares in June.

    What investor would have any reason to sell lots of share at a price which gives away an unreasonable discount from the price at which he expects to be able to sell provided the Phase III results due mid-year reproduce the level of efficacy evidenced in the Phase II studies?

    Who would bet against our new market valuation delivering a share price of at least $30?

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