Intellipharmaceutics International Inc. (IPCI)

[fred198484]

The shorts are working hard - they are up to almost 9% of the float now. Clearly, they are betting on an offering as their escape route. Normally, I might think they are smart as most company's would have an offering to enable the company to get moving on PODRAS and Regbatin. But with the company likely generating free cash flow, Odidi may just choose to wait until they get cash out of a Rexista partnership before getting going on PODRAS and Regbatin trials.

That may not be in anyone's long term economic best interests, but it would not surprise me at all if that is what happens. In order to maximize shareholder value in the long term, it might be best to just get on with the testing, which will require more money than they are likely to generate in Q3, Q4 and beyond. But Odidi does not want to lose control of the company so he may not do a highly dilutive share offering.

Then again, there may be a more creative way to go about getting the money. Maybe they sell rights to Seroquel for cash. Maybe they settle on more attractive terms than we would like (more attractive for Purdue) and get cash that way. Time will tell.

Meanwhile, the shorts are in control until the company provides evidence that there is no hope for them. Being cash flow positive in Q3 and beyond is likely not going to be sufficient to drive them off. A quick settlement/partnership with Purdue would do it, however. Or raising money in some other manner that does not allow the shorts to get out.