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发帖数: 1572 | 1 http://seekingalpha.com/article/286770-dendreon-s-plunge-no-sho
Dendreon (DNDN) shares have been absolutely decimated in the past month,
with shares falling almost 75% from $40 at this point last month to $10.37
as of this writing. The majority of the loss came as the market digested the
company's latest disastrous earnings report, which included a huge revenue
miss and a removal of the company's previous revenue guidance. Analysts
punished the company with a wave of downgrades, and the stock collapsed -
and as of yet - has failed to mount any recovery, falling further in
subsequent trading sessions.
While Dendreon's near-term fortunes offer a potentially lucrative
opportunity, wise investors should examine the bigger Dendreon story, as it
has played out to be a classic Wall Street drama with enduring lessons for
us today. Dendreon has long sought to commercialize its unique prostate
cancer fighting drug Provenge, which uses a patients' own blood cells in
combating the cancer.
Dendreon was listed with little fanfare. Its shares, with brief exceptions,
traded under the $10 level from 2001 until early 2007. All that changed in
April of 2007, however, when an FDA panel announced that it favored approval
of Dendreon's Provenge cancer vaccine. Shares tripled on the announcement,
and went even higher in coming days, soaring from less than $5 to $25 in
just a few trading sessions. The bulls came out in full force, setting
wildly bullish price targets of up to $400/share over the next five years.
The enthusiasm came to a quick halt, however, following the FDA's request
for more information about Provenge which sent shares down more than 60%.
Dendreon quickly returned to the sub-$5 range, and fell as low as $2.55 in
early 2009. At this point, Dendreon faithful turned to conspiracy theories,
suggesting that short sellers had tampered with the FDA's approval process,
and that a great web of short sellers were manipulating the company to try
to buy it out on the cheap or destroy it entirely.
As time dragged on, and Dendreon stock remained stalled under $5, Dendreon
bulls continued with their conspiracy chatter. They took to labeling the FDA
's actions as the "Provenge Approval Scandal" and accused the government of
playing "Hide and Seek" with the facts. Best of all, Dendreon shareholders
were blaming the "naked short sellers" for keeping the stock down. They
claimed that hedge funds were short selling shares of Dendreon stock that
didn't exist (so-called phantom shares) to drive the stock down. Despite the
SEC's assurances that this wasn't a major problem, the conspiracy theorists
kept up with the anti-naked short selling drumbeat.
But everything changed in early 2009 when Dendreon secured FDA approval for
Provenge. Shares rebounded back into the high twenties, and would later
surge to more than $50/share. Despite the alleged nefarious schemes of hedge
funds betting against Denderon, the company's shareholders were still able
to prosper greatly following FDA approval. The leader naked short-selling
conspiracy theorist, Overstock.com (OSTK) CEO Patrick Byrne, declared
victory. He had his Deepcapture website write up an absurd 15-part article
series purporting to show how naked short sellers had almost killed Dendreon
, and how government intervention was needed to stop further alleged market
abuses that were alleged responsible for nearly destroying the entire
country's financial system. (When making a conspiracy theory, one should
always go big.)
The 15-chapter series (Part 1 of 15 here) claims that hedge funds
intentionally tainted the FDA's approval process in an attempt to either
kill Dendreon or take it over on the cheap, and also to help competitors
such as Cougar Biotechnology (subsequently purchased by Johnson & Johnson (
JNJ)) which would supposedly fail if Dendreon succeeded. The author of the
series claims that the supposed evildoers, led by Jim Cramer and Michael
Milken, were tied to the Mafia and were to some degree culpable for the
deaths of 60,000 men due to prostate cancer between 2007 and 2009.
According to the naked-short sale conspiracy theorists, Dendreon just barely
managed to escape defeat at the hands of a huge criminal enterprise willing
to condemn cancer patients to death in exchange for mere profit. If true,
these actions would amount to a stunning crime that would shake the hedge
fund industry to its core.
Fortunately, the truth is much less exciting than Mr. Byrne's grand
conspiracy. Like many biotech companies, Dendreon plunged after bad news -
the FDA delay - however its shares continued to trade at a higher level than
before the initial 2007 spike. The market correctly priced in the news of
both possible success and the subsequent delay. There is no evidence that
short sellers were able to misprice the company's equity. And many of the
short sellers who originally shorted Dendreon turned positive and went long
as FDA approval approached. That's how a normal functioning market works.
Dendreon bears had fairly good reasons to be skeptical of whether Provenge
would be approved (heavy insider selling during early 2007 for example
casted doubts on whether management truly believed in its product), and even
if it were approved, there were still great reasons for doubt as to whether
the drug would be commercially viable. Given its nearly $100,000 price tag
and its extremely limited ability to length life, it was never a given that
the drug would gain wide consumer acceptance. As we've seen in the past week
, bears were right in questioning whether Dendreon's Provenge would ever
become a profit engine.
The sad thing is that Dendreon bears were accused of everything just short
of killing cancer patients when they were in fact right with much of their
short thesis about the company. Investors sitting on 70% losses in Dendreon
stock would have been much better served listening to the bears rather than
having had them shut up by a flood of anti-short selling sentiment.
Bears raised valid concerns such as suggesting that other companies had
potentially better cancer-fighting drugs than Provenge. Instead of
acknowledging that other drugs might also work, Dendreon's fan club alleged
that short-sellers were attempting to bankrupt Dendreon so as to help other
cancer-fighting companies' stocks such as Novacea and Cougar. While Novacea'
s drug failed to secure FDA approval, Cougar's (now Johnson & Johnson) drug
is now FDA approved and ready for patients. But by shutting their ears to
the bears, Dendreon's investors missed a lucrative gain in Cougar shares and
got left at the bottom part of the Dendreon roller coaster.
At the end of the day, a stock's price is driven by how well the company
performs. The alleged victims of massive naked short selling have all been
either tiny companies with unproven business models such as Sedona Corp (
SDNA), CMKM Diamonds, and Overstock.com, or large financial firms which
failed for obvious reasons (example: Bear Stearns and Lehman). Dendreon was
the only example of a supposed victim of naked short selling that overcame
the alleged criminal activities.
But it turns out that Dendreon simply rose and fell as the market digested
news of FDA announcements and drug sales. As we've seen recently, when the
company's outlook fell, no short selling assistance was needed, the stock
gapped down 65% on news that the market correctly interpreted as very bad.
Dendreon trades as you would expect a company to trade following news. As
Gary Weiss wrote back in 2009:
So here we have a man bites dog story: a company that is a poster child of
the anti-short-selling conspiracy kooks, and which has just whupped the
shorts the only way they can be whupped - by producing a product that works.
That company is called Dendreon Corp. and word emerged this week that its
prostate cancer drug had passed clinical trials.
Dendreon's product works sufficiently well to justify its massive price tag,
the company's stock will soar again. If Provenge fails to meet expectations
, the stock will sink. No conspiracy involved.
Investors in other stocks with massive fan clubs take note. For example,
cheerleaders of Sirius XM Radio (SIRI) claim, with no substantial evidence,
that naked short selling has kept the stock down. SA Contributor Satwaves
wrote last year that:
Sirius XM shareholders are all too familiar with naked short selling, which
was the topic for the documentary “Stock Shock,” which I took part in. It
is the primary reason that Sirius XM’s share price sits where it does today
. The stock continues to be cellar boxed and the SEC continues to allow such
illegal activities to persist.
No, Satwaves, that's not right. It fact, it is completely bogus. Sirius was
"cellar boxed" because it was a debt-ridden company with no track record of
profitability. The economy improved in the later-half of 2010, the company
stepped up its operating performance and began generating profits and the
stock more than doubled. Now the economy has entered a tailspin and Sirius
has dropped sharply, just as forecasters such as myself predicted. Blaming "
naked short sellers" is like looking up at the sky and muttering whenever it
starts raining, rather than looking at a weather forecast and packing an
umbrella if necessary.
Investors, particularly when group psychology comes into play in widely-held
stocks such as Sirius, like to make their stock into a loyalty test. If you
buy the stock or write positive things about it, you get to be part of the
club. If you sell your shares or predict negative things for the company,
you are lumped in with the bad guys. All rationally is eliminated as
speculators trade their stock on pure emotion. Just as Dendreon bulls did
before, Sirius shareholders are blinding themselves to the fundamental
economic headwinds that are sending their stock lower.
By claiming their losses are due to a phantom conspiracy rather than hard
economic facts, a shareholder can shift the blame from their own bad
judgment to mysterious outside forces. Don't fall for the trick. Whenever
you hear claims that a company is being sunk by naked short selling, the
truth is that poor management performance is the probable culprit.
It's laughable that Bear Stearns and Lehman were destroyed, as naked short
selling conspiracy theorists claim, by short selling. Their own pathetic
management teams did a fine job of sinking those firms without any outside
assistance. And let's remember that Overstock.com has perpetually been a
loss-making has-been online retailer that has never successfully competed
with Amazon.com (AMZN). Its CEO, Patrick Byrne, is the leader of the naked
short selling conspiracy camp. Perhaps he spends too much of his time trying
to make his company, and others such as Dendreon and Sirius, victims of a
massive conspiracy rather than managing his company's affairs? I suggest he
get back to work fixing his own company's problems, as Gary Weiss said, and
make a product that works. That would take care of the short sellers. | b**********k
发帖数: 1262 | 2 好长， 居然看完了
“Don't fall for the trick. Whenever you hear claims that a company is being
sunk by naked short selling, the
truth is that poor management performance is the probable culprit.
” |
|
