BARDA or one of the others very well could do a new contract, but if/when it's clear that they have no such plans, it's a good bet the board tries to sell all their IP for whatever they can get, fold up shop and send shareholders the proceeds. They are definitely in cash preservation mode right now.
I'd be cautious banking on a retail short margin call party - I think that the only way we get a spike past $4 is with some surprise news that makes that 50c residual value look wildly pessimistic, such as a 9-figure BARDA deal...very much doubt we'll see any such thing before the election without, God forbid, a terrorist attack. I also think the PIP board will spread out the distributions so as not to give themselves (and the rest of us) a needlessly high tax bill. I also think the "agenda institutionals" is probably a lot more than 20% - maybe as high as 60% - whatever it is now, it used to be a lot higher. The remaining 40% retail bears are, IMO, largely angry SIGA dupes, semi-pro Altucher haters, and garden variety green candle bashers. I'd also change "getting margin call" to "getting nervous enough about a margin call to do something", though those percentages may be as good a guess as any. The bears all really do know they've lost this one, but that obviously hasn't stopped them all out at some long fantasy price - they will continue to try to play us to the best of their ability.
They don't necessarily have to sell more - the level 2 Gandalf asks have been in the $2.40s until recently, and their purpose is to scare away new traders, and if they're lucky, scare out old traders into the catcher's mitt bid. The latter isn't happening as quickly as they'd like, but they are going to remain patient. News is probably going to be their enemy, but they're not going to give away the store on suspicion alone. If the market makers were providing substantial volatility, they'd definitely try to take advantage, but so would we, so both teams are kind of waiting on the last impatient long moron / bully short to sell too cheaply.
There's definitely a difference between a retail guy trading with IBKR with $4M in available margin cash and a $500M AUM hedge fund banking at Goldman - the latter would have to be insanely reckless to get in margin trouble on a single short position (indeed, they could single-handedly make a micro-cap hard to borrow, but the knucklehead at the trading desk doing that without the boss's blessing might not be at the trading desk very much longer), whereas some joe-blow trader guy who'd, say, shorted 200K of PIP at $4 a few years ago on the zero-shot thesis, waited for the appeals to complete, and went from owing $320K (@ $1.60) with $500K locked up to owing $498K (@ $2.49 on Apr 25) with $747K locked up - that sort of chap is definitely trying to trade his way out of this little pickle. The price has interested parties Gandalfing the ask, but there are enough traders just trying to profit that the shorts are still able to cover some (latest SI went from 1,547,812 to 1,504,973 during Apr 27 - May 10 - if you'll recall, there were a lot of late-day paint jobs in a $2.30-2.40ish range).
The SI report doesn't differentiate by retail vs institutional channel AFAIK, though some retail brokers who do some private investment banking might be able to run a report on their own clients. Doubt it matters in a micro-cap much, PIP even less so - any institutional types shorting PIP are likely doing it to curry favor with Perelman, not to make money.
The rule for shorting stocks, Reg T, is that you have to have margin cash for 1.5 times the current amount owed on each stock - so if you'd shorted GE yesterday at $30.15, you'd have to have had at least $15.08 per share shorted in margin cash before shorting, and then maintain 1.5*GE*(shares short) in cash ever after until covering, all while being also accountable for the GE quarterly (and any special) dividends. It's rare for a firm with lots of cash to run afoul of this and other margin cap requirements rules, but it does happen from time to time. The SEC also has a margin requirement for securities priced under $5, requiring a minimum of $2.50 in margin per share short.
Exactly right, G. If JackHat's team had any valuation facts to support their bear case, they'd be making them...LOUDLY. Instead, they paint the price as drifting lower using their own short sales, and point to that as evidence that they are somehow right about their supporting-fact-free valuation. Anyone reading these posts will note the umpteen times you've asked JackHat to defend his pessimism with numbers, and he only chimes in, often with with something about fish-heads-eat-em-up-yum, on a down day. If he wasn't such a piece of work, I'd probably pity him in his textbook grief stages - Denial ("My opinion when the dust settles and all the courts close their books on this case this at best is 2.00 and change stock for a couple of days and after that it goes to a buck and change." - Mar 30), Anger ("My job is to highlight message board trolls like yourself who purposely entice people (novices) that this is a sure bet." - Apr 6), and now Bargaining ("Because I just might buy me some pip if this falls below $2.00" - today). Anyone can spot that he mentions yours truly, at least indirectly, in the vast majority of his posts. It's not because he thinks I'm going to do anything other than counter-punch...it's to help his team's short bets maybe get some trader nerves a-twitching in his team's favor. But I do hope he's right about the price direction on that $2 call - more than most, I know how these crooks like to fish for stops. Boxing them out before they cover is pretty much what I do.
I think cash2go meant the May 4th 10-Q vs the prior Mar 4 10-K. He might be getting alarmed at the cash change from $112.7M to $104M. I don't think he noticed inventories going up from $12.4M to $22.8M. They do still have a contract they are in the process of fulfilling, GAAP skullduggery or no. Total assets line was down about $1M, so I'm not concerned, but his point is a very good one - the SIGA management would and will pull any fast one they can, so we should be vigilant.
Thanks for sharing your view, cgc. I won't complain about getting option 1 (current shares wiped, new shares to PIP), but I will be surprised. Certainly wouldn't be the first time SIGA / M&F did something insane if it were to play out that way.
cgc - I think we agree on the basic question: is TPOXX worth at least $200M in future profits?
If the answer is "no", then the naive rational choice is to let PIP have the equity. The more sophisticated choice needs to price in the cost of improving odds of a SIGA shareholder class action lawsuit succeeding....if M&F's decision to throw in the towel might lead to another 9-figure punitive damages assessment, then they are better off to admit that "they broke it, so they bought it"...it was their guy (the late Don Drapkin), after all, who inked the deal that led to this very bad outcome. Even after M&F fired Drapkin, SIGA made plenty of "we're gonna win this thing!" noises in public, undoubtedly damaging SIGA shareholders in the process. And then there was the 2011 pump and dump...they are already in trouble here, but abandoning the shares makes this problem much much worse.
If the answer is "yes", then the question becomes "is it cheaper to "bail out SIGA" or "let SIGA fail, and buy out PIP"? I think electing the latter will make the price of PIP go up so much that they'll wish they'd have elected the former, but they might roll the bones on PIP shareholders not having the patience to see through work on a drug that at one time had SIGA worth $15/share.
In general, I think SIGA and M&F have spent way too much effort on trying to get the bird in the bush...they could have bought out PIP in the summer of 2010, offered a SIGA-share based settlement in 2011 when the price was $15-ish, or not pursued the Chancery appeal...all would have led to better (though far from perfect) outcomes. The bird in hand is to raise capital...M&F can certainly afford it (whether they want to or not), and they may get help from other SIGA shareholders who exercise their rights under the Ch 11 exit. Funding the operating budget is a good point, but small change compared to the award and future profitability.
Oops - last sentence should be rephrased: I believed M&F and SIGA would put profit and sound risk management over foolish pride. I was very, very wrong.
There you go again pestering with cynical psuedo-questions, JackHat. Though it probably pains you a lot more than I to admit, I absolutely have been wrong - once upon a time I bought a lot of SIGA to hedge my PIP bet. Lost about 75%, and can still claim the tax write-off, which is only one of two silver linings...the other being I do have standing in the inevitable lawsuits against M&F for tortious interference in SIGA's contractual obligations and SIGA breaching fiduciary duty by doing their bidding. But I'd have been way better off not believing that those parties would put foolish pride over profit and sound risk management.
I agree that a majority of SIGA shareholders deciding to make their investment into a (non-golden) goose egg is very unlikely - if they've really hollowed out the company so thoroughly that they'd even consider option 1, they make the breach of fiduciary duty shareholder class action a no-brainer. A lot of the hypothetical plans out there in our little sewing circle seem to forget that M&F is constrained by the Ch 11 exit plan - anything they want to do to raise capital has to be available to all SIGA shareholders on a pro rata basis, so if SIGA issues, for example, $100M in convertible bonds with a set conversion price, they have to offer proportionally to all SIGA shareholders of record...M&F could get at least $25M of that, but can't get more unless others waive their rights. I'm sure what everyone over there would prefer is that the FDA approves TPOXX in a manner that triggers a billing milestone, and then pay off PIP the easy way. But if that's not in the cards, their non-silly options are (NICE option) convertible bonds with a conversion rate north of $2, so that the fully diluted number goes to 100M shares or so, or (MEAN option) huge number of new shares so that those forgoing their right to participate essentially get what Spider-Man got from Lex Luthor in the Social Network, but those who do participate basically get their old (or maybe increased) share of SIGA for their share of the $100-150M price tag.
cgc - I was agreeing with most of what you'd said prior to this latest "Dilution is a possibility" post - to me, it sounds more like a rationalization for the sideways PIP / falling-knife SIGA price action rather than a plan M&F and the other SIGA shareholders would ever bless. SIGA did win the future of TPOXX in court, and throwing that away by turning over the keys to PIP leaves the people involved (SIGA BOD, Perelman, etc) even more wide open to shareholder lawsuits, and for much higher damages. Microcaps are not usually very efficient markets - their prices are more a function of what speculators with dry powder want to see (usually to scare others into making mistakes) than what "the market thinks"...in these cases, the market only thinks "I want to make as much money as possible, and gosh, it's scary out there!". Reluctance to buy SIGA at 350% of its 20c rock-bottom (with no volume to speak of) is not all that surprising, since the best case for those shares is "diluted a little rather than a lot". PIP's price range might be disappointing to some who thought we'd go right up to fair value; but the volume tells the real story - those who bet poorly on the outcome (short about 2M shares before the verdict) felt some pain, but didn't panic. They are trying to get out of their bad bet by re-shorting at higher ask, fomenting as much long-side disappointment as they dare. Their proxies are out in force here - same people who've been doing this stuff for years, but no longer able to insinuate that "somehow, PIP will lose the lawsuit" - now they have to switch their story to "somehow PIP wont get paid in cash", as if that wasn't actually a better outcome in many ways. No wonder that JackHat and Drod would have it as "the price should be lower merely because we want it lower - no reasons required!" Tomorrow evening, the as-of-mid-May SI report will print, and we'll see what those rascals have been up to since the last big decrease in SI.
Just trying to goad you into suing a billionaire, loser. Maybe you're just real real smart to be afraid of him, and would totally rather give him a pass on what he did to you. 'Cuz nobody ever wins suing him, y'know. I'm sure the bold bold way you spew cynicism and gotsta-has-the-last-word-compulsions with nobodies on Yahoo make you a brave brave chap.
You wish, JackHat; but there's ALWAYS math involved in the market. Determining which math applies, and which math is being used to tell lies (such as your team's insistence on painting the tape, then claiming that the tape means you were "right") is the difference between signal and noise, between winning and losing, between knowing when to hold, fold, and go all in....just so we're clear, I think the right call on PIP is hold, with 30% ready to box out your team's ill-advised but bankably predictable mischief.
I totally see that Rose earned your hatred; In fact, I think you have cause to sue the SIGA board for breach of fiduciary duty. Your resentment of PIP shareholders is really about you being too much of a wuss to take on those who actually wronged you in favor of whining like a little B to thems who got what you consider to be an unfair, but nonetheless legally binding award. Coward...
I, too, know when to cut my losses. This ain't that, and if you were a fair-minded person, you'd know this, Drod.
Since we're actually invested one way or the other here, our scuffles make more sense than your thousands of "woe is me, Rose done me wrong" posts on the SIGA board, Drod. But I guess everyone needs a hobby.