$heff's $tation of $tocks & $olid DD

[JSuh]

$IDRA... Baker Bros. Related Filing (Link) & Reality

(Click on - "last capital raise" link in the article to download filing file. Then, search for "Baker" keywords)
http://seekingalpha.com/article/2074453-idera-a-compelling-biotech-pick-for-march

In 2013, in connection with our financings in May 2013 and september 2013, we issued and sold to Baker Brothers 5,865,000 shares of our common stock,warrants to purchase up to 20,316,327 shares of our common stock at an exercise price of $0.47 per share and pre-funded warrants to purchase up to 19,992,302 shares of our common stock at an exercise price of $0.01 per share. Under the terms of the warrants and pre-funded warrants issued to Baker
Brothers, Baker Brothers is not permitted to exercise such warrants to the extent that such exercise would result in Baker Brothers (and its affiliates) beneficially owning more than 4.99% of the number of shares of our common stock outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants. Baker Brothers has the right to increase this beneficial ownership limitation in its discretion on 61 days’ prior written notice to us, provided that in no event is Baker Brothers permitted to exercise such warrants to the extent that such exercise would result in Baker Brothers (and its affiliates) beneficially owning more than 19.99% of the number of shares of our common stock outstanding or the combined voting power of our securities outstanding immediately after giving effect to the issuance of shares of common stock issuable upon exercise of such warrants.

My thoughts & honest speculation:

The SA article was extremely misleading to claim that BB controls 42% of all shares. Because Pillard Investment Group actually owned more shared than BB, the company made sure in the contract to prevent BB or anyone else to own more than 4.9%. The existing company saw large two hedge funds as threat to their own ownership power and control. This means that BB MUST SELL existing common shares before they can exercise more warrants to convert options into common.

With warrant prices on the derivatives securities, each share is basically around $4.00 for BBs. This looks to me that when the company issued more offering, they did not want to deal with the public. So they sold (including "warrant rights") big chunks of cheap shares to BB and Pillard to ensure that enough capital would be received when needed.

And of course BB would be not so compliant with their limitation to 4.9% ownership agreement. So what can the company do to satisfy them? Especially when they have been selling away common shares (that they acquired for ~$4.00) like hot cakes after this filing & agreement? Give them a seat at the board.

So to me, if I read everything right, IDRA sold them shares and warrants to BB to ensure they had a backing of a firm with real capital, without dealing with the retail markets. The shares were sold for pretty cheap, in average price when including warrant prices. And since BB literally has access to 43% of common share worth of shares, as soon as exercisable date was reached (02/2014), they have been selling their common shares like hot cakes.

There will be even more downward pressure, as they try to convert more warrants into shares, but they must sell existing common shares before they convert! (4.9% agreement).

Things I have heard about BB's involvement has been very misleading and flat out questionable. Also, just because the data is positive in the first place, I do not see any reason why BB would suddenly join the board. Sounds more like a financial deal here, where BB could not own enough common share % to exercise real rights and voice in management, so management might have compromised in the middle to give them a seat at the board, so they can at least know and have some saying in the management.

Also with these prices and still high market cap, the best pop we can see is 25-30%. (Still have to complete P3...)

Why I am conservative with price pop after positive data:
1. Small current short float. So after the news, it would be a good reason and trend for increased short interest

2. Sell on the news - general trend of the industry. No discussion here.

3. So many people who bought since low, mid, high $6.00 are extremely exhausted, scared, and stressed, especially after today's raid. I think they are realistically looking for any profit, whether very miniscule or not. Also, when the Reason 2 is initiated and these people see price starting to decline, I suspect that there will be many who will panic and sell. These people again, do not want to deal with raids any more and would love to accept 10% loss over 45% loss they are accustomed to at this point. Just psychology.

4. The discussion has evolved around data release so much that prospect of the company has been concentrated from this press release. So I don't think there will be huge volume of people wanting to accumulate for long term investment. Just playing "around" the binary event.

Disclaimer: Yes I was super long, then I started questioning this serious bear raids. I sold with a loss. I did more research and now I am cautious. Not bearish, just "cautious" and rather neutral at this point.