Replies to post #6999 on Halozyme Therapeutics Inc (HALO)

[biotechinvestor1]

Just have a look at XBI, the biotech index and you will have your answer.

XBI has been cut in half.

[Protector]

Fred_Kadiddlehopper, HALO and CDMO are both stocks with an extremely low liquidity. That means that the share price can be moved with very small amounts of shares (relatively).

If a stock is in demand (as both are) then Inst. Inv. buy the down-pressure of the shorters. For HALO from the 50's, for CDMO from the 35's.

As a consequence the number of outstanding shares increases (shorters add outstanding volume) on a PPS that goes down. Behind the screens a lending contract BLOCKS the shares of the lender to be used (small daily fee involved).

So, :
- HALO shares with a lending contract CANNOT be used until shorter buys back and releases shares.

- Shorter has hard time to buy back because shares did not MAJORLY go to retailers but ended up on the shelf of Inst. Inv. that do not sell them easily. (e.g. they don't listen to nonsense from sources as Zacks, etc IMO, they are pro's and look at the fundamentals).

- Market Maker now have more difficulty to make market (low liquidity). Hence they also short, intraday, to free up shares by hitting stop-losses. But the IIs buy in competition with them, hence their shorting doesn't yield the same results anymore.

- If more shares end up on II shelfs, then more lending contracts are available, because in general it are the IIs that provide them underlying stock. And the cycle starts all over.

So HALO and CDMO are under extreme down pressure due to their success...BUT that is only temporarily. Each time the elastic is pulled down by shorting parties and II buys, closing the short positions becomes more difficult. PPS can go up very quickly when margin calls or any other event forces them to close.

So, HALO and CDMO aren't at all down due to fundamentals or bad news (HGEN for instance is) but due to trading/investing tactics and mechanisms.

If that elastic bounces back (for instance if a share count or acquisition/merger is to take place) then the PPS shoots up like a rocket because everybody needs to FORCED close short positions. A Qualcomm alike effect.

AIMO