Ariad Pharmaceuticals Inc fka ARIA

[jbog]

Flexinvestor,

You are correct when you say the shorts get hurt when the price increases but let's keep in mind that 'new' shorts will see a bigger opportunity.

When someone was short in feb (30 mil shares) their max gain would have been $4 if the stock went to zero. Today a new short could have a gain of $14 so he has a better opportunity if he thought the stock would dump.

There's a base short we have to disregard and I'll guess for Ariad it's in the 20 million share range. These positions are strictly hedges and derivative contracts that'll always be there. These people have both sides of the trade so there have no opinion if the stock goes up or down because they only make money when it moves.

The owners of the remaining 15 million shares want the stock to fall. The far majority of these shares are traded by Inverse or Short Biotech ETF's. There are many available on the open market that you and I can buy. Look at something like the Proshares (ZBIO or BIS). These funds short most of the Bio's but they do normally pick the high flyers. You would buy this not only to short Ariad, but to short the whole sector.

Considering the whole Biotech sector has outperformed every other sector over the last 5 years I'm sure a lot of people are shorting the sector.

Then you have ETF's that short the whole Market and they again will pick on the high flyers.

The only way Ariad can avoid this is to get back in the middle of the pack through value creation. Once Brig is approved they'll create that value. If Brig has a FDA hiccup the shorts will win this war.