Back in the late 1950s or early 1960s, there was a company called Crosby Teletronics. The founder and CEO was Murray Crosby, the inventor of FM Stereo. For many years, Crosby Teletronics licensed their technology to all the manufacturers of FM stereo radio transmitters and receivers. Among them were major corporations such as GE, Westinghouse, Phillips, etc., which paid royalties on every device they made. Crosby became a very profitable company until the licensees decided to stop paying royalties. This forced Crosby to sue for the royalties that were rightfully due them for the use of their patented technology. During this time, Crosby bought his own company's stock heavily in the belief that he would eventually win in court. The licensees, which all had very deep pockets, dragged out the process for years with appeals and legal maneuvers to force Crosby Teletronics to spend huge sums in trying to protect their patent rights in court. Eventually, they ran out of money. While this was going on, the CFO was shorting the stock with the knowledge that the company was quickly running out of money. Murray Crosby was buying stock from the CFO who was shorting the same stock. Unfortunately, Murray Crosby didn't know that the company was in danger of going bankrupt from the huge legal fees. Eventually, the licensees succeeded in driving the company out of business, and the CFO made a huge killing at Murray Crosby's expense.
So much for a stock that was being accumulated by the founder and CEO who should have been in the best position to see what was coming but didn't. All he knew was that the law was on his side. The deep pockets of the huge companies that were making a fortune on manufacturing and selling millions of FM Stereo radios won by simply forcing Crosby Teletronics to spend themselves into oblivion. In this case, the CFO and his friends won big by selling the stock short to the CEO. Is Dr. Frost the only buyer of OPKO? Just asking.
Did I mention anything about being short??? Absolutely not! To short a stock under $10 that is tightly held by a few key, wealthy individuals, could end up being financial suicide. I'm not that imprudent. I was just making the point that sometimes even the numero uno guy doesn't always know everything that's going on in a company. The fact that this company has yet to turn profitable means nothing at this stage of the game. For a short to be profitable, the FDA would have to turn down virtually everything in the OPK pipeline. Some things may not pan out, but the huge potential of just one or two could easily be devastating for the shorts.
BTW, I'm long a very modest position. I didn't mean to imply that there's no risk; there certainly is. However, it seems to me that the much greater risk is on the short side.
My guess is that this is not out of the realm of possibility. Dr. Frost has to be careful not to get himself into a position where he could be accused of "front-running" (buying with the foreknowledge that a takeover is in the works). A takeover would be fatal for the shorts. An FDA approval of even a single potential blockbuster ($1-billion) product would be another fatal development for the shorts. All things considered, I definitely would not want to be short. The potential gain is miniscule compared to the risk.
The shorts are betting on something akin to what happened to Crosby-Teletronics on April 19, 1961. The stock was $15 at 9:59AM; by 2:00PM it was $2.50. Opko Health is NOT Crosby-Teletronics, but the shorts can dream. Their problem is that the dream could turn into a nightmare and catch them with their pants down around their ankles. Then, guess what happens. Ouch!
Haloid (Xerox) was a classic. There was a M/M working for a small pink sheets house who decided to stay late one fateful Friday afternoon. At around 5:00PM, he got a panic call from MLPFS (aka Merrill Lynch) with 10,000 to sell at market on a margin call liquidation. He generously offered $1 knowing that he was the last guy on the street still open for business. About 2 or 3 years later, I saw him sitting at his desk crying like a baby. He had just seen XRX cross the tape at PAR! It turns out that he sold the 10,000 first thing Monday morning at $3 and thought he had made a fabulous killing. That was huge money in those days. Well, I guess it's not too shabby even today.
The shorts wishing OPK to go lower won't make it happen. It doesn't work that way. I wish I had a dime for every stock I didn't buy because they had no earnings only to watch them soar to the stratosphere. There were plenty more that had big earnings only to crash and burn. I offer ENRON for your consideration. LOL
As I've said many times, the risk/reward ratio doesn't make sense for the shorts. Way too much risk for way too little potential reward is always a bad bet.
Market crashing, Opko climbing. In the present political/economic environment, it's good to have some holdings that are unaffected by broad market sentiment. It wouldn't surprise me to see a new high very soon. A meaningful breakout would put even more pressure on the shorts which would then become a self-fulfilling prophecy. I recommend that the shorts start exercising to be able to bend over at the waist, hold their ankles, and prepare to endure substantial, prolonged pain. They should also keep the personal lubricant readily at hand.
I could be mistaken, but this looks like the biggest daily trading volume for the year. I didn't check beyond that, but it's possibly the biggest daily volume since going public. This follows unusually heavy volume yesterday, but that was nothing compared with today. With the strong price trend - in an otherwise very weak market - on soaring volume, the shorts might be getting just a weeee bit nervous (besides getting margin calls.)
Truth be told, I'm happy to see so many shorts. I hope they stay short for a long time. That's the healthiest situation for speculative stocks like Opko, and it's what attracted me in the first place. As the stock moves higher, I'd like to see the short interest expand accordingly. There's nothing immoral or illegal about being short, but it can become a very expensive habit. I'm short and would love to be taller, but this is not the kind of stock I'd ever want to sell short. Investing is all about the ratio of risk to reward, and being short this stock simply does not make sense in my book. I've been in this game for over 60 years, and I learned a long time ago not to buck the trend. I guess you young puppies will have to learn the hard way. Good luck.
I've seen valuations for Twitter of as much as $20-Billion bandied about this morning. The company has never made a profit and shows signs of slowing usage even before it goes public. Makes me want to run out and buy more Opko!
I advise the longs (and the shorts) not to get too OPKOmistic. There's an old saying about not counting your chickens before the eggs hatch. It's not money in your pocket until you actually sell and book the profit. There's no question that this stock is extremely strong even in the face of the Congressional insanity plaguing the country. We have a democracy run amuck, and the consequences won't be pretty. Whatever your politics, it's extremely disheartening to watch the country self-destruct. Just be patient and try to remember that our present situation is like constipation... this, too, shall pass.
Just to be clear.... I'm LONG! I believe it's FINANCIAL SUICIDE to short stocks like OPK. Maybe after OPK runs to around $200 or $300 it might be a good short trade. Then, there's enough room on the downside to have a successful quickie in-and-out trade for a few points before it goes to $500. I'm long, I will stay long, and I don't like being called short (even though I'm definitely shrinking from old age.)
MCD is far from oversold... still has more to drop. I wouldn't even consider buying above 90. The tide has turned. The very low dividend increase tells me that management is very pessimistic about future earnings, and China is a huge concern. I'm looking for the low point to be around 82, which was the low about a year ago. Then - and only then - will MCD be a compelling buy. Not now. There might be a relief rally if/when the present insanity in Congress abates, but it will be a better selling than a buying opportunity.
I'd like to see a spike to about $10.50 at 3:59 today, but wishing won't make it happen. It just doesn't work that way.
Dr. Frost took good advantage of that dip to buy another 19,000 (?) shares. There's a definite pattern to his buying. Whenever there's an opportunity to buy cheap stock, he steps right up. Gotta hand it to the guy. He has guts and conviction. He probably loves the shorts for providing him with bargains that they'll soon be forced to buy back at much higher prices.
I've been warning those who are short this stock to beware. I've been in this business for nearly 60 years, and I've seen this story play itself out too many times to count. There's nothing wrong with shorting a stock under the right circumstances, but this one is an almost perfect bear trap if ever there was one. Be smart... cover those positions before it's too late. When you get a margin call, just walk away. Don't throw good money after bad. There's no way of knowing when or where the top will be, but it could very well be substantially higher. You're sitting in the middle of the tracks, and the train is coming. You can hear the whistle and the roar of the huge engine. Don't just sit there and do nothing. COVER, COVER, COVER!!!!!
The stock is worth whatever the market says it's worth. Fundamentals are meaningless when there's a short squeeze in progress and potential profits are enormous. Based on earnings and balance sheet, OPK was overpriced at 4.