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Cytodyn CEO, Nader Pourhassan's accent didn't prevent him from making it a $3 billion market cap company
I am European, speaks 5 languages of which English is only the third. So...things are often not what they appear to be at first glance. Judgement based on language is often wrong in a global setting.
CYDY down to $5
This is an incredibly good price to sell at.
Here is the stock price reaction following Cytodyn's July 20th press release about its previous COVID trial:
It went down badly, not only because of the huge disappointment it caused, but also because the company had piled up unrealistic expectations and because stop losses got triggered. As one stop loss after another is triggered, a vicious circle destroys the stock price.
Nope. I wrote about that already. I won't repeat.
This was not my point. I was answering a legal question about the primary endpoint failure of Cytodyn's upcoming COVID trial. Secondary endpoints were not my focus there, although they are part of the legal thinking.
Not at all.
I was explaining how Cytodyn may think about not qualifying the primary endpoint failure as a material event (worthy of an 8-K SEC filing within 4 days).
Explaining how someone else, here Nader Pourhassan, Cytodyn's CEO, might think does not make you believe in that.
And any future class action will very probably challenge that thinking as well.
Unless they consider that the primary endpoint failure is not a material event, given that a deeper analysis of the secondary endpoints may reveal something positive anyway.
That may be what they did for the previous COVID trial (CD10): given the important delays there to reveal the primary endpoint had been missed, it is entirely possible (only the SEC could check the delays there, determining who knew what internally and when) that they have skipped the material event qualification for the primary endpoint, arguing internally that the secondary endpoints were as important.
After all, that's what they tried to make the shareholders believe, that NEWS2 (one secondary endpoint datamined in a sea of missed endpoints) was a good news. Until the infamous Christmas Eve Dump where they finally admitted the CD10 results would "not support an eIND".
My single liine below stems from having had the opportunity as a quant to work 8 years in a major investment bank in various analysis & management positions, both on the market side and on the structured finance side. Includes a nice experience in market abuse monitoring. This was not in the seventies but right before and after the financial crisis. So, pretty modern stuff. From market microstructure models to loan covenant shenanigans, I have seen many, many things on both the issuer side and trader side.
The single line is the following: Cytodyn matches many fraud patterns.
Well it can be denied for the reasons I explained, because there is a HUGE coincidence:
- Cytodyn starts selling to a private investor 0.66 million shares over the weekend at a -40% discount
- The following Monday and Tuesday the stock drops down to a low of nearly -40% with huge volumes
- The company does not file the private sale form (form D) to the SEC (and its shareholders) in the time frame imposed by law but nearly 1 month and a half after the fateful weekend
The potential relationship between these 3 events, if not proven has not been discarded either and remains a huge question mark. I hope the SEC brings clarity there someday
I don't see the relationship with Cytodyn.
Focusing on Cytodyn:
Cytodyn is breaking right in front of us yet another expectation, and the stock price is slowly adjusting day by day to this sad reality. Until stock price crashes when panic settles in.
Another expectation will be generated by the company. Like all previous expectations - who remembers the HIV BLA, UK, Mexico, Thailand, Canada, NASH, Leronlimab+Remdesivir, the 50 patients interim, the first COVID trial, Cancer, the secret billionnaire investor, the BP discussions, the Operation Warp Speed interest, etc... this new expectation won't be met.
This is the principle of the Merry Go Round: the company cycles through new promises each time the previous ones are broken, to maintain investors' support.
I expect this to continue...unless the company bankrupts...which looking at their balance sheet and toxic loan terms, may happen very soon.
Nope. Stop orders being triggered and trader rooms stepping in to catch a bounce and profit from there. This explains very well this type of bounce we saw in Cytodyn stock price on Nov. 9-10 2020.
These 2 days the bid side of the Cytodyn order book got destroyed by the sale, the stock crashed, triggering stop orders. Until the initial sell order (broken into iceberg chunks) got exhausted. There, the order book was "clean" for a bounce, very dense on the bid side and exhausted (rarefied) on the ask side. There, trader rooms stepped in and catched the bounce.
It's pretty standard and common on the OTC market and Cytodyn was no exception.
Are we talking about this for Cytodyn. This seems to explain the CYDY stock price movements during private shares sales in november
Detailed analysis here
Excepted here it lasted 3 days until the bounce materialized. So, by the logic you explained, this cannot be naked short-selling. This coincidence remains and is appalling.
What is intriguing for the late Cytodyn form D filing is 2 things:
(1) The very next market day (Monday, Nov. 9th, 2020) after the private sale started,
the stock crashed by -20% with huge volumes.
(2) The following market day (Tuesday, Nov. 10th, 2020), it crashed again to a combined low of nearly -40%,
to stabilize and bounce slightly above the -40% discount price of the private sale
Remember, these days the private Cytodyn sale was still confidential (unknown) for shareholders. They were contemplating a -40% stock crash without any information about who could be causing that and why.
Huge volumes, not seen since last summer. And a clear low in the stock price, I bet many investors exited with signifiant losses (stop loss orders triggered).
These 2 events, the private sale and the stock crash, were so close in time and in price that it raises the question of their causality (or not). We don't know today if they were related or if that was a pure coincidence.
But we know SEC regulation forces the company to document such private sales (form D) within 15 calendar days. Precisely to ensure shareholders are properly informed of such material transactions and can adjust their decisions accordingly within a reasonable timeframe.
Yet the company did not follow this regulation. They filed the form D 39 days after, nearly 1 month and a half after the coincidence.
These are 2 key questions for the next company's conference call:
- Have they been informed of any relationship between these 2 events?
- Why have they decided to wait 39 days to file the form D?
Upon the interim review of Cytodyn’s pending COVID trial, its Data Safety Monitoring Committee (the only ones having access to unblinded trial data) have made a request for a new, unplanned, interim review at 75%. This demand was backed with 3 words, according to CEO Nader Pourhassan (Oct. 20th conf call):
“Sample Size Reassessment”
Sample = The trial patients
Size = The number of these patients
Reassessment = evaluating if there are enough for the trial to have any chance to detect the hypothetical Leronlimab effect
The company has rejected this demand.
Today we still don’t have any press release from the company about this trial, despite completion. We know the CEO has been VERY aggressive with press releases in the past.
In parallel the company has paid for a new Proactive post, published yesterday, that talks about long haulers, NASH, cancer, etc...
Merry go round.
Writing is on the wall.
No press release...the company should know the arms mortality but, yet, does not share it with its shareholders.
Writing is on the wall.
Note the difference between “apply for” EUA and BLA AND “obtain” EUA and BLA.
It’s the difference between a fraud company and a real one.
It’s an ironic difference. Groundhog Day.
This is very useful to the contrary because:
(A) now is a perfect time to sell. Rich price, embedding unrealistic expectations. Whether long or aspiring short, this price is a great deal to sell today. Ask the people who bought this summer from $5 to $10 how they felt when the stock went down to $1.63. They had a -80% loss.
(B) you might ask why a short would write that and not just wait for the trial result. Well because we will never get the trial result! Remember for the previous CD10 trial: today, 6 months after, the detailed data has still not be published. The company tried to suggest during months that its results were great, sidelining any detailed discussion / research paper about the missed primary endpoint and missed secondary endpoints (all of them excepted one, and the data being undisclosed we dont even know if they hacked the analysis on this last one) before admitting in the infamous Christmas Eve Dump that the trial results, after all these months hiding its detailed data, could “not support an eind”. But we still dont have the detailed data. Same story for the HIV BLA, that they mysteriously have never been able to submit properly to the regulator. Its a never ending story they never recognize failures and always delay until they introduce a new promising application for an entirely different disease (right now it is becoming Long haulers, next may be cancer?). This the is Merry-Go-Round I sometimes use as an analogy to educate naive investors about the danger if Pump and Dump fraud stocks. So its a continuous education. Naive investors have to learn to recognize the patterns, one by one. And start to identify when the company storyline is cycling through another fad. Groundhog Day all over again. For the current fad, the Covid Severe/Critical fad, there will never be a better time to sell. Then the next fad cycle will take over etc... it’s a classic pump&dump fraud.
Remember, the DSMC wrote 3 words:
Sample Size Reassessment.
Sample = The trial patients
Size = The number of these patients
Reassessment = evaluating if there are enough for the trial to have any chance to detect the hypothetical Leronlimab effect
I cant make it any simpler. If you dont understand it or dont want to recognize it, its okay. Thats why its a market. People disagree, the market is the mechanism by which each side makes its bets, and ultimately reason prevails. Just like the CD10 trial. The stock went from $10 to $1.63
The fact that Cytodyn's DSMC requested a new, unplanned, interim review at 75% for (I quote the CEO, Oct. 20th conference call) "perform a sample size reassessment" speaks to the contrary. Most investors have missed this gem, it was burried ini the middle of a long conf call. These few words means they were trying to mitigate the risk that the trial's 390 patient would not be the right number to demonstrate an hypothetical Leronlimab effect. Writing is on the wall.
If your logic were true all trials would be stopped at 50% interim. Think. The reason it is called an interim is that, in most cases, the "trend" is not strong enough to validate anything, whether positive or negative. It is just an early look that sometimes (rarely) allows to take a shortcut.
Of course the first point should read “started selling $1 million in shares”...as anybody can verify in this document...
Note: the share price of this transaction was $1.5 (a -40% discount to the then public stock price) but this is another story...
These are Cytodyn facts. Click on the links, read them yourself.
2 Cytodyn & SEC facts below
(1) FIRST FACT: from Cytodyn's website, first form D filled on Dec. 16th with the SEC (not the one on top which is a different matter).
Link there. Screenshot below.
It says they started selling $1 shares to a private investor on Nov. 7th
That is, they filed the form D 39 calendar days after the first sale.
(2) SECOND FACT: from Cornell Law School's library, an extract of SEC laws
Link there. Screenshot below.
It says the issuer (Cytodyn) must file the form D at most 15 calendar days after the first sale, plus week-end if it falls on a week-end.
So it seems a key piece of information was disclosed late to the SEC and consequently to shareholders. Why has the company chosen to do that?
You cant compare both. CD12 is for severe and critical patients. Your study automatically qualifies for critical only (read Cytodyn’s CD12 trial criteria).
Additionally, Cytodyn excludes the most critical patients (high respiratory risk and/or vasopressors for >48 hours)...yes Cytodyn excludes the high risk criticals. While they are included in the study you have quoted.
So you are comparing a much milder (on average) population (Cytodyn’s CD12) with the very last step before the cemetery. If you do that then I could compare against severe-only studies with a 5% mortality. That would be equally meaningless.
I was very preoccupied with these benchmark questions a couple months ago. Invested quite a lot of men days reviewing in depth 50+ papers worldwide (both studies and meta analysis), both US and non-US, that covered exactly the severe to critical spectrum. No milds, no moderates, no severes-only, no criticals-only. They all had mortalities between 12-24% with an average (across studies) of 18%. US-only average was also 18%.
You got it. CTMedic's 32% figure is a ratio involving (obviously) a numerator (deaths) and a denominator (hospitalized COVID patients). It is VERY important that both are measured homogenously: in the same way, on the same scope, with the same eventual gaps and approximations.
This is not the case at all. It is a well known shortcoming with US hospitalization metrics. You can discuss each of them separately, but as soon as you start dividing one by any other you end up with funky numbers that are completely irrealistic.
For example, in some cases you can find out more ICU patients than hospitalized patients...
The only solutiion is to restrict the scope (through a study, or a zoom on a couple states) to guarantee that you are dividing consistent numbers.
2 parts:
(A) Statistical
I determined that the study was under-powered to detect any meaningful effect on the primary endpoint. That is, with so few patients it would fail (reaching the primary endpoint with statistical significance) with >99% probability. This is exactly what happened.
It took some work, it wasn't a back of the enveloppe estimate, as I had to review all the existing research literature at this time to frame various probabilities (mortality, survival curves, soc)
(B) Financial
The company had all the patterns of a pump & dump fraud. A looong list of them. I have shorted >100 frauds over the last 10 years after I became independent and it is rare to see all the patterns matched. Cytodyn is such a case. Nader is very good to pump his business, I see longs criticizing his accent and sometimes obvious mistakes. But they dont realize how good he is to sell dreams compared to most frauders out there. The company would never be there without him.
I reached the same conclusion for the pending CD12 trial on both counts.
Excepted the hospitalized patients mortality is not 32.7%. It is half of that. I intended to post about that tomorrow, you just blew my French effet de surprise. Kudos.
Now with a 16% mortality this reverses completely the post conclusion: Leronlimab doesn't work and is just as safe and as effective as saline water.
I am convinced anybody who believes in “science” will not bias his acceptation of your original post just because a percentage number is corrected.
Go to Cytodyn website
Open the first Form D (the bottom one, not the later one on that day that is on top in the web page) from Dec. 16th.
Open also the Form 10-Q recently filed (in January). Search there (it's pretty long) for the typo "$.5" (dollar dot five). This was a typo, the real price was $1.5. Also search for "ratchet".
Both documents give the complete picture if you can piece things together.
Lookup my last post, I link these together and show this guy VERY PROBABLY:
- Short-sold the stock immediately
- Crashing the CYDY stock price by -40%
- And got paid by shareholders for that
While triggering the the toxic loan ratchet terms, pure poison for shareholders
Longer details on this Cytodyne investment that is so disastrous for shareholders are here:
https://www.twitlonger.com/show/n_1sri8nc
This is this exact same investor who got a -40% discount and very probably crashed the stock the next 2 days by ... -40% ... that s a pretty expensive price to pay for shareholders:
- Raise $1 million
- Leave $0.67 million on the table as a discount
- Let him knowingly crash the market cap by more than $1 BILLION
- And trigger the ratchet term of the Fife toxic loans
You dont do that unless you are desperate
Excepted...two key foundations of your post are wrong.
(1) The ratchet term has no relationship with the loan default. It is independent. The ratchet is triggered if the company sells shares to ANY investor below $10. Which occurred, at $3.36 in nov/december. There are however ADDITIONAL terms that deal with a loan default,on top of the ratchet, and they would be very bad for Cytodyn. They increase the loan principal, not only once but several times (distinguishing major from minor defaults, one penalty per event of default, the counter can add up pretty quickly).
This is all written in the loan contract synthesized and attached by the company to its SEC filings, all investors should really read it in detail. This explains who is in control of their capital now.
(2) The toxic lender effective conversion price is, consequently, not $10 but much lower. The company owes $7.5 million every month to the toxic lender. Last month (December) they paid it in shares, $3.4 a share. It's strangulating the company and that's not a surprise, that's what John Fife (the man behind Iliad and Streeterville capital) has done with every company before. In January again they owe $7.5 million, etc...
No need for Nash strategy games when the company is a fraud, its product is saline water, its "science" fake, and its financial statements show a bankruptcy coming, and its only financing is through toxic loans.
The ratchet reduction from $10 to $3.36 and lower is fully automatic
This is written in all over the posterior 10-Qs and related S-3 and 8-K filings. One synthetic examples (but you will find longer details in the loan contract that they attached in one of their SEC filing):
"...is subject to full-ratchet anti-dilution protection, pursuant to which the conversion price will be automatically reduced to equal the effective price per share in any new offering by the Company of equity securities that have registration rights, are registered or become registered..."
Note, here "anti-dilution protection" means protection for the lender (Fife's Iliad and Streeterville Capital), not the borrower (Cytodyn).
This explains how Nader Pourhassan (Cytodyn CEO) could say that his deal was "anti-dilutive" and still not fear being charged by the SEC for lying. He didn't lie. This deal is anti-dilutive. But for his lender, not for his company. This is very ironic. I still think any upcoming class action will try to find an angle there because this clearly has mislead shareholders.
Now you could assume that Fife will play nice and forego these terms with Cytodyn. That's exactly NOT what he did with >20 companies he financed before Cytodyn. He killed each of them.
The toxic loans conversion price is not $10 anymore but $3.36.
And it will go lower.
Explanations below
This is a tricky piece of financial engineering by Nader and his toxic lender, Fife. It is not designed to be easily understood (because, really, it's a bad loan for the company, the only one he could get). So I will explain it. But every piece of information comes strictly from their SEC filings. You can (you should) read them yourself. They don't hide this information (they are careful because you guys will attack them some day with a class action lawsuit). They just make it very difficult to piece together. But for finance professionals this is a piece of cake.
$10 is the initial conversion price, that's true. Note the "initial" adjective. It's key.
But there is a trick. A term called the "full ratchet" term (search for these keyword in the filings, it's all explained there, in all 10-Q filings and all and loan-related filings). It states the following, deep in the middle all of a loooong boring paragraph: should in the future the company sell ANY share to ANY investor below the default $10 conversion price, AUTOMATICALLY the conversion price is adjusted down to this new price. And the number of shares granted to Fife (the toxic lender behind Iliad and Streeterville Capital) is multiplied by as much, so that Fife makes $21 million in all scenarios.
This is an outstanding risk-free deal for Fife. Risk-free because he is guaranteed to be given $21 million in value whatever the stock price. And outstanding because he can freely short the shares in parallel, having a guaranteed cover price.
This is the reason these loans are called toxic loans. On top of having the toxic lender short the stock, the company incurs an infinite risk of dilution. Should the stock go to $1, $0.5, $0.25 etc... shareholders are funding a crazy dilution against their interests. Sound overly pessimistic? Well that's what happened to ALL companies who got toxic loans from Fife before. More than 20 of them. In each case, their shareholders thought it would be ridiculous for the stock price to go that low. Well it went to zero. Fife took the best from these companies.
That is another reason many short-sellers (including myself) came here. Not only is this is company a fraud that will never succeed in obtaining any regulatory agreement. It is trapped in a toxic loan and we are only following the master seller, Fife, until the end of the road.
As of today, the adjusted conversion rate is already $3.36 a share, -40% below today's stock price and -66% below the initial $10 price. Because this is the price at which the company sold $1 million in shares at 3.36 a share to a private investor in november/december. This comes from the company SEC filings from this time frame. Just read them.
All this information is in the SEC filings submitted by the company. No need to believe me, go there and READ. No wonder the CEO and CFO sold 87% of their shares after they signed these toxic loans.
Again, wrong. The recommendation to perform a sample size reassessment (with the disastrous news that an extension would be required) was made by the DSMC.
But the decision was not made by them. It was made by Nader Pourhassan, the CEO. Who had no access to the data (only the DSMC could access it).
Nader chose to not listen to them. Given the disastrous financial position of the company, I think that's because he had no choice (otherwise the stock would crash and his toxic loans would have thrown him into bankruptcy in a matter of weeks). He took the only road he had left, to fake it with his investors a little bit longer by not following the DSMC, the time for him to find financial backing for yet another round of pumping. Remember, Nader has lawsuits with former insiders and his Chief Medical Officer which state that he exagerates and lies to his investors. Writing is on the wall
No, it's the opposite. For such a short trial, the only case where you need a sample size reassessment is when the hypothesized effect is not trending in the right direction and you have a doubt that, should it exist, you will have enough patients to correct the bad luck and detect the effect (with statistical significance). That reassessment allows you, ini emergency, to extend the trial by a couple more months, the time to recruit more patients (eg +100, +200, +300) to see if you had only bad luck or if the hypothesized effect finally appears.
It's a bad news against their initial hypothesis.
If that were the case, it is litteraly NOT a sample size reassesment.
Technically, this is a statistical significance test. You test if you can reject the null hypothesis H0 (that the treatment has no effect against standard of care).
Not the same at all (and not the same math. procedure even if both are not hard to perform).
They didn't write that they wanted the new 75% interim to perform again a statistical significance test. They wrote, and these are very specific words, that they wanted to perform a sample size reassessment.
I am a statistician and such technical words have a precise meaning.
This is again an unfounded rumor.
I have worked in Investment banking before working for myself, and no, what you wrote is just not factual.
If you can borrow shares and short them, it makes no sense to use a naked short sell. Why commit a fraud when you can just get the same result legally.
Margin requirements is not a good reason - any short-seller who leverages so much his positions that he would need to workaround margin requirement is dead anyway. I have had many shorts go x2-x10. This is part of the business. Eg, KODK went x4 against me before I made a TON of money on it. I have had many (many) like that. Consequently, successful short-sellers have to be very careful with leverage (among other things, like the presence of a catalyst also) and always keep dry powder (capital) on the side.
The only viable reason to use naked short-sells is when you can't borrow shares anymore. THERE, it can be very juicy because that's where the return is maximal on short positions. But this has not been the case most of the time for Cytodyn. Again, I have had no issue borrowing shares most of the time.
You didn't know this stuff obviously. As for your Napoleonic references, I happen to be French, trained in a military school founded by Napoleon, who celebrates several times a year his accomplishments. Not my thing clearly, I don't revere that, but I think I can spot fakers there too. Sorry kid to destroy the black ninjas fantasy. Cytodyn is a fraud.
Dr. Patterson owns shares of Cytodyn - this is litteraly the very definition of being incentivized.
Nobody could prove the same for Mr. Feuerstein, whether long or short.
So, a proven fact on one side, an unfounded suggestion by yourself on the other side. When in doubt, i trust the fact first.
As for shortsellers, there is nothing wrong in making FOIA requests and spreading them. Not more wrong than, let's say, asking a conference call to the FDA and making a Press Release out of it. Or asking a meeting with the MHRA. Or with Mexico. Or Thailand. Etc... Cytodyn has been makiing these suggestions for months and yet, you had no issue with that.
No double standard, Mr Double Standard
Retired from employment at 38 and now happily trade my own capital.
Have shorted >100 frauds over the last 10 years.
Cytodyn matches all the patterns, it has all the signs.
This is far from my only position (i have 23 currently). I always zoom in on one of my position and go to the nottom of it every 2-3 quarters, to sharpen my skills. The rest is mostly dormant and waiting for the catalysts to unfold.
No need for black ninjas, conspiracy theories or any shining thing for kids. I just count beans for my longs and hunt frauds for my shorts.