[[[[[[[[[[[ Money to operate for 6 months, and we need 2M to operate for next 12 months. ]]]]]]]]]]]]]]
- Based on data, promising company in a huge potential market. 20-for-1 Reverse Stock Split in May reduced the float from roughly 43M shares to 2.159,156 shares.
Recent S3 points to ability to raise up to $50M - Filed with SEC through the SEC and set up through the designated underwriter.
Looking at the anemic volume on the chart covering its publicly traded history, this company was off the radar - The volume coming in is real, the market is real, the data points to a Phase 3 with a pre-Phase 3 FDA meeting already in place.
The stock's already had a big move. It's likely the MMs are going to short this heavily off of what in retrospect will be highs into a secondary announcement drop. A Reverse Split points to avoidance of de-listing and to a higher share price with a lower float based on promising data, which explains the swift price movement.
If it's at market, it's a heavy hit to raise substantial money after a parabolic move. If it's private placement, it's at a discounted premium to where the stock is trading. The company raises money it desperately needs. The MM will short it to the secondary private placement range, or to where it trades to depending on how far it pulls back on an at market public offering. Retailers in on the parabolic move get hurt but the company will be capitalized for the longer run.
There's a clear and transparent urgency for funding.
Partnership based on strength of data with purchase of common shares as part of package (OMED this week) ? That would be strong and purchasing of Common Shares by a larger partner is part of the new landscape for small biotech R&D courtships in the market.
Question is always what is built in at this point based on where the data is and based on the overall fundamental story and based on reasonable likelihood of a secondary on these hard pps moves up.
For the hell of it, 155M cash added to 10+M shares (float) is $15+/share. From $15.13, that's 30+/share. No matter what the math or road to a projection of a market's pps here, the reality is that the injection and agreement offers immense wind at the back of the company. It eliminates surprise dilution at any point, which is what's usually an endless part of the fabric of small and promising R&D biotechs. These are early stage commitments, but substantial.
Based on the FORM D Filed on Friday, add roughly 837+K shares (FORM D $22,249,996. divided by $26.57 for the sake of argument = 837+K shares even though they are Restricted) to the OUTSTANDING SHARES AFTER adding the 1.470,588 bought @$ 15.13 as well, and OMED will have 30+M OUTSTANDING SHARES, but as far as real effect at this point on the FLOAT, FOR NOW, in terms of what's available, it has essentially remained the same in terms of supply and demand. Bullish story. It's a question of where the ultimate support is, where buyers will come in, and whether there could be one raid to take it back to the $20+ area before it has a long run. The story transformed. Shorts covered. The bullish case says the selling is ending.
I'm sorry, my 28M referred to OUTSTANDING SHARES (27.9M shares), not the FLOAT (10+M shares), My calculations were based on the 1,470,588 shares bought at $15.13 being added to the OUTSTANDING SHARES bringing it to 29M +shares. I see this agreement of buying $22.25M dollars worth of Common Stock at $15.13 as shares that, while technically being part of the FLOAT going forward, I see as shares that are bought and held long, so I don't see them as immediately dilutive in terms of being added to the active FLOAT.
Because they are a structural component of this agreement, I see it as a long-term appreciating investment that is bullish, as through the appreciation of those shares bought, it represents a self-repayment hedge against the original down payment, and could ultimately represent shares owned to later potentially appreciate even more on positive efficacy and safety well - down the road as trials play out, in which case it's logical OMED could be acquired much later.
Exempt Offering of Securities to Officers of the company valued in the amount of $22,249,996. -
See NASDAQ SEC Filings for OMED. This is part of the market culture and always has been. These are granted shares outside of the market float and at some point, on the sale of them by these insiders, represents a form of eventual dilution, which is nothing new. It's natural insider wealth creation.
Also, and separately, if the float prior to the partnership for the six anti-cancer candidates in the stem cell pipeline was roughly 28M shares and roughly 1.5M shares were bought at $15.13, then it makes sense in my view that a beginning point would be to value 29.5M shares @ $15.13, which gives OMED a $446,335,000. market capitalization there. But, adding the upfront payment of $155M, when added to that capitalization gives OMED a market cap of $601,335,000. when divided by 29.5M shares give s a pps of $20.38.
This calculation doesn't take into account any incentives/royalties/potential developments beyond what actually contributes to the actual capitalization now.
The IPO was roughly 6 months ago and had traded down from a $30 + high at that open (5+M share volume), and what's interesting is that there were two gap downs on relatively low volumes compared to the volume on the day of the IPO. Those gap downs were from $26+ to $23.47 (377K volume) and from that area down to $20.13 (526K volume) . Since then, prior to the major news this week, the daily volume had become anemic - trading at below 100K shares/day at times, and the short interest, interestingly enough, gapped up in October into November near the lows since the IPO, so the shorts (1M shares +) got caught on the gap up and had to BEGIN covering at the open with the price already gapped up.
The pps movement down created millions of shares underwater for the last 6 months, so on strong volume (consistent w the IPO volume), there were sellers on the gap up. What we are seeing the last 3 days is the selling ending.
With the higher lows, from a technical perspective, it seems that the selling had ended and buyers were coming in to create higher lows, but the price was at a point of breaking through the resistance level just above $14 (3rd or fourth test it looks like). The market did a good job of setting up that resistance level and establishing it clearly in the minds of all retailers, and combined with the negative short-interested blog barrage, they ensured that it would break to the downside on Friday. Combined with any loss-selling, they manage to take out stop losses and break it down technically after building the higher lows. Without some clarity, in this vacuum on no substantial new buyers, the shorts become the low volume sellers on the bid.
That made me laugh. Basically, I'm saying compare a 6 week line chart with the 6 week daily candle chart and you"ll see that on November 7th, there were a lot of existing longs who retgretted NOT selling at the open and there were many NEW retailers long who've been under water holding positions taken that day through the reversal and they've been IN GERN into today's open. Many of them sold. That's what I'm trying to say -
By the way, the fact that the parabolic move on November 7th climbed above $7 to finish at the low of the day is actually an important clue to why there was a sell down on the parabolic move earlier today that ran out of steam. Essentially, there's a 4 to 5 week cup-w-handle dynamic (just dynamic) in which the buyers who got caught buying into the climb on Nov 7th (or existing longs who held through the climb and reversal that day and have held since) sold into the climb or on the reversal at the open in fear of a similar under water window ahead when they saw the chance to get out essentially even or slightly up or down once it started to reverse. It means those sellers are essentially out, and as I hoped to point out earlier, it requires a reversion to the mean to some extent in order to clear out those sellers, to return shares to the market as potential buyers for the next run. On continuing good news, as long as the share price doesn't break down severely (I've seen bear raids orchestrated right as a fading volume handle had formed at which point buyers would come in to take a share price through a pivot point to higher highs (QCOR on the first epic bear raid by Citron), then on increasing volume (buyers have to come in w some short covering a component of it as well), GERN can go to new highs. Will it fade to $5 support before it becomes attractive to new buyers at the point when the selling has nearly fully ended? We'll see. Would they love to fill the gap on the original parabolic move from areas well below $5 ($.4.50 range?)? Absolutely. Right now, the pps is 200% above its 200MDA. It's come a long way. BUT, getting the potential sellers today (the buyer on Nov 7th and longs who rode through that and felt regret NOT having sold on Nov 7th out of the way is positive in terms of clearing the airspace above.
Through a Dark Pool and posted. Didn't affect PPS in real time as the shares put together in order to have the trade executed are the CONSEQUENCE of the disruptive climb and sell down earlier today.
Amidst anemic intraday volume relative to the open.
A huge cover agreed to between a Market Maker and an institutional short, or an indication of accumulated shares by the Market Maker sold to an institutional long.
BIG TRADE and it is the dominant BID-ASK of the day from what i see. The bear raid clearly (or speculatively)
fueled and facilitated this transaction. At these prices, it was a potentially bullish transaction for longs.
And retail longs looking to come in off of lows today, do not be confused with some retail short covering or retail day traders coming in on intraday narrow range momentum to trade out several % above entry points. These are players that leave some retailers under water when the dust clears VERY QUICKLY.
And, of course, they can raise more money with fewer shares issued at these levels, so it gives the company much more leverage. Also, gives them leverage to raise money through a private placement of shares with an institution at a price premium (downside) to where it's trading. If it's a bullish story, and this IS, there's incentive to get a heavy institution on board who's done their research (institution's prop desk can also short the existing pps down to that price as well as it will often test it once).
And you are absolutely right. IF there's surprise breakthrough news regarding pursuit of Accelerated Review, additional data, partnership potential (immediate cash infusion and subsidizing of clinical and marketing costs down the road) at any point, the terms change here with heavier upside potential on that news. This is a bear raid for the sake of accumulation, potential covering on the potential of stronger information than released as of today. If little new information is given, this bear raid sets up a retail psychology that what has been presented to date IS built in and here at the end of the year, retailers may capitulate to some extent if there's a slow fade. It's certainly what the shorts want. It's likely what the MMs want. The company is likely extremely happy as their capitalization is substantially higher, de-listing is presently off the table, and the share price is above $5 (institutions often will choose not to buy some stocks below $5 if positions aren't able to be margined I believe). Above $5. this can be shorted, which explains, for other reasons discussed, why the short interest has climbed on a run from $1+ to $7+ at one point only recently. I imagine the short interest actually goes up on today's parabolic opening.
Also, based on analysis of cash position, quarterly erosion of reserves, with costly clinical work ahead, with the recent great news and clinical data presentation imminent, combined with statements made in the 10Q regarding the selling of common shares into the market at any point based on substantial costs ahead, shorts may be anticipating dilution and a lower share price near-term. This is all speculation, but it's part of the playing field. $1.11 on JUNE -
Just took a look at NASDAQ Short Interest numbers for GERN. DOUBLED over a two week period to 10M+ shares shorted from 4M+. These are important clues. After such a great run, coming into the end of the year, when combined with the idea that some of the potentially transformative news is built in, combined with natural end-of-year profit-taking, and when combined with a bear raid with stop losses taken out methodically, and when combined with an abatement of new buyers (as opposed to day-traders and momentum intraday traders who'll come in on days like today), a vacuum is created in which heavier short interest can create momentum in terms of BID erosion because buyers don't step in. These are the dynamics that could easily take this to $5. - It could be where shorts do some covering, where new retailers take long positions, where MMs have built in major profit having sold shares higher and shorted off of parabolic highs (twice in 3 months), and where day traders and momentum traders push the ASK as well. These are the components of the REVERSION TO THE MEAN. All players contribute -
This was $1.11 in June, less than 6 months ago. Recently, it's traded 6 to 8Xs that value. If you only see intraday charts or recent daily charts (last 3 months), you lose perspective of reversion to the mean arguments that point to rational technical re-tracements. The technicals for eventual price movement actually get stronger were this to establish a new base there. As several posters have referenced here: What is built in here near-term? Do they need to raise money and will they take advantage of the hyperbolic 6 month move? Speculating (because we couldn't know), is the Market Maker strategizing, based on a potential private - placement Secondary at a fixed pps well below where the pps is trading at some point, to short shares where GERN has traded recently TO THAT PRICE? Adding shares to the float, either way (private placement at a downside premium to where the pps on any negotiated date for an agreement as incentive for an institution to buy shares OR at market), represents a lower share price temporarily IF it is the case. These are the things to at least consider. At these levels, UNLESS there's extraordinary news COMBINED with extraordinary short interest (and the stock is no longer at such a low share price that it risks receiving a de-listing notice, but it is at a higher enough share price that it's possible that short interest could increase because of its recent run off of such lows), which were to induce a parabolic covering temporarily, my point is that AT THIS EARLY A STAGE, reversion to the mean is always at play. It's an important part of the playing field. Look at long term charts, and it's extraordinary how often after major moves, a stock's price will retrace to fill some gaps long-term (not always of course), retracing to the strongest long-term support level before continuing a climb. You won't have that perspective on a 3 month daily chart.
" In October 2012, we entered into an At-The-Market Issuance Sales Agreement, or sales agreement, with MLV & Co. LLC, or MLV, which provides that, upon the terms and subject to the conditions and limitations set forth in the sales agreement, we may elect to issue and sell shares of our common stock having an aggregate offering price of up to $50.0 million from time to time through MLV as our sales agent. We are not obligated to make any sales of common stock under the sales agreement. To date, we have not sold any common stock pursuant to the sales agreement.
We estimate that our existing capital resources, amounts available to us under our equipment financing facility and future interest income will be sufficient to fund our current level of operations throughAT LEAST THE NEXT 12 MONTHS. However, our future capital requirements will be substantial. Changes in our research and development plans or other changes affecting our operating expenses or cash balances may result in the unexpected expenditure of available resources. "
AT LEAST 12 MONTHS - This language brings us to where we are today essentially.
Very often on these pps moves early on in these R&D stories MEANS RAISING MONEY THROUGH A SECONDARY. In retrospect, it's the culture of these small companies, and on that announcement, retailers suddenly have clairvoyance and punish themselves for not having taken profit. Be careful of hyperbole on message boards. You're better off reading updated 10Qs.
There's a confluence of events taking place here in relation to price action.
GEERN has had an extraordinary run near term, and in relation to Fibonacci Retracement patterns, it makes sense that there's a reversion to the mean to some extent. Reasonably, this could retrace to $5 and on a one-year chart, it shouldn't spark outrage. There's always profit-taking by retailers and the Market Makers always tend to short shares they've distributed on extended moves to the upside. It's the way the market works. It's actually a component of consolidation and a re-setting of supply and demand in terms of generating new demand for shares, even if it means taking out stop losses set by retailers and creating cascading moves to the downside temporarily.
This is essentially a bear raid, which requires stop losses be taken out, and it also forces retailers who have major profit built in to capitulate to some extent. Some retail longs will add. Some will be traders around a core position. Some will just take profit on a long climb from below $2. this year.
It's also end-of-year. There will be profit-taking regardless of near-term potential upside. The prop desks of the market, and the Market Makers as well, rely on the most players being hurt in order to extract profit. Many retailers came in long here seeing $7-8 today based on a test of the parabolic move in November. Didn't happen today so far, but this is being shorted and attacked in order to ACCUMULATE. Bear raids are often BULLISH, but there's carnage on the road along the way. Great story long. Presentation is important. How much is built in for now? Do they need to raise money (after reading recent 10Q, the ability to issue shares is in place already)? Do they take advantage of a 200% climb this year considering where they were? Retailers have done well here recently. Profit is prudent w re-entry on a newly established base ($5.00+).
Good post. Strong view that there is a long fundamental story here as well as a dynamic related to trading and momentum trading /movement in the market. THIS VIEW is the way to commit to the markets. It creates opportunity from a trading perspective short-term and represents stability in perspective in existing positions long.