Time Has not run out but it is running out
L_VUS expressed concern "time has run out". The market says it has not run out yet but it is running out. This is expressed in the price trend on the largest time-scale visible on the chart (back to 2005). It is negative on an absolute basis and even more negative on a relative basis (vs. SP500, vs. NASDAQ, vs. Biotech Stocks, etc).
So yes, the market is losing faith but it all hope is not lost yet. Right now the market is pricing the stock as if it were a 3 year call option, that assumes volatility over the last 24 months will reflect the volatility over the next 36. I think this makes sense. The money will be gone in roughly that time span, making an assumption about burn rate. I think of those funds as the Herpecide money. That is their last chance in my opinion to do something real. If that fails the ability to raise new money is essentially gone - gone as far as the current common shareholders go. Any new money raised at that point would be so dilutive of the current common equity, that they would essentially be out of the picture.
The price history since early May has reflected investor indecision. This produced a sideways converging price pattern. That pattern has begun to resolve to the downside, though the signal is not yet definitive. A close below 1.45 would be a definitive signal. So the market is gradually coming to a conclusion regarding the chances of a Herpecide success.
Only substantial material progress can reverse the negative trend.Longs that continue to hold must ask themselves this: If I had no position today, would I go out and buy the same number of shares I currently hold? If not then the only rational course of action is to sell. You always have the option of buying in again and possibly at a much lower price. The downside to this strategy is Diwan/Seymour pull a rabbit out of the hat and the stock rises so fast you will have to pay a much higher price to rebuy. Given the past 11 years is that likely?
Trendliner
