Jake, your theory carries some plausability the way you describe the mechanism and also somewhat answers a question others have posted about: If PPHM and Bavi is expected to be worth billions, why is the stock trading below a buck when news of trial success (or failure) may be just a few months away?
The accumulation loop hole makes the market a bit spooky for small investors in any company, not just PPHM. Is PPHM being affected by such trading? It would explain a lot of strange trading patterns over the last couple years, but I would like to think that PPHM has not been the target of such practices. Unless the loop hole is being practiced throughout the financial markets, why would "little old PPHM" get targeted for this. Because PPHM has Bavi? Who would know of the significance of Bavi plus be positioned to orchestrate the accumulation loop hole? Conversely, if the practice is wide spread, why wouldn't potential acquiring parties that want to take over companies with promising technologies or fruitful markets make it a point of acquiring as many shares on the quiet as they could, using the loop hole as standard operating practice, before making their intentions for a buyout known? Based on the New York Times article, there hasn't yet been much action in manipulative accumulation in support of buyouts and many financial institutions might consider the practice unethical and shy away from it, but how can small investors know for sure?
I didn't know this loop hole about buying/selling voting rights separate from economic rights existed, but the New York Times article confirms that it not only exists but is getting practiced in a big way in at least one, high profile incidence. Is the practice wide spread?
I am still waiting to see how all the 30 million shares from the last placement ended up being distributed. Also recall a few years ago that the Barclays share count for institutional disclosure shifted from being substantial to being minor without much shift in the market trading and some had suggested that the shares were not necessarily sold to retail, but rather redistributed to individual components of Barclays international system so that the components were below reporting thresholds. Is this sort of practice really being done?
Theoretically possible or not, I wonder what difference it would make to PPHM and its shareholders if there were some covert accumulation being practiced in concert with shorting that is financially linked to the covert share accumulation, like you describe. Consider that, PPHM did place a poison pill that sets a floor of about $11 pps plus the market trading price at the time of implementation after which the distribution of new shares and option rights brings the financials to who knows where. However, the last placement of 30 million shares also carried a poison pill exemption proviso for R&R, presumably to keep R&R clear of problems that might be incurred if an existing share holder wanted to pick up most of the 30 million new shares, considering that they amount to just about the 15%, poison pill trigger by themselves. That would suggest a lot of shares could come forward under ownership that surprises at least those of us buying retail if those placement shares did not already get assimilated by retail since last July.
If PPHM management were confronted with a share holder interest that had surreptitiously accumulated 20% or more of PPHM shares and said surprise, we want you to do..... ???, what would be the likely response? There would be cause for concern for investors if the ?? was contrary to long shareholder interests. What if the ?? was more like you (Jake) described, where the primary purpose was to pick up a large percentage of shares on the cheap from weak retail hands looking into an uncertain future before offering a fair market price buyout to the PPHM Board? What if the surprising party told PPHM that they are just going to hang on to those shares or, if PPHM would like, sell them back to market if PPHM doesn't like their offer? Is it hostile if the surprising party says they think Bavi is wonderful and look forward to PPHM moving along their business plan while they hold 20% plus of outstanding shares? Recall that the PPHM board of directors has to decide to exercise the pill option. The pill trigger, I recall, is not automatic, but only comes into play if the Board deems the action was hostile and acts to implement the pill.
In theory, the Board would be faced with the prospect that 20% of its shares could be dumped onto the market when pricing was already depressed due to the shennanigans of the surprising party or that they could accept the surprise buyer's "fair market" bid, rewarding current shareholders and tolerating the fact that 20% of the shares were sequestered away by the surprise buyer for the buyers own benefit. The end result would be that only those shareholders that had weak hands and sold during the period of uncertainty would be losers, as you suggested. Would such share holders be able to bring suit against the surprise buyer if the market practice used to accumulate the 20% shares was not in violation of any regulations? Or against PPHM if market analysts agreed that the buyout price was fair and that regulators could affirm that management couldn't have disclosed that the bid was imminent?
For what it is worth, Imclone market value exceeded $7 billion when Erbitux was in its enthusiasm stage. If PPHM responded to even that level of market capitalization, the pps could be around $30. Bavi success would, I believe, be worth much more. I consider a $10 pps buyout basis to be a low offer if Bavi proves itself during Phase 2 trials.
Ultimately, PPHM's technology like Bavi and Cotara need to demonstrate their value in trials before PPHM has much of anything worth the trouble for a hedge fund to orchestrate accumulation of the nature described in the New York Times article. Until which time that sort of valuation is affirmed through delivery of PPHM business plan milestones, $10 + pps isn't likely to happen. Has the value of PPHM technology already been affirmed in the lab and we are just experiencing the end game while data delivery catches up and achieves financial market recognition? That sort of speculation could be part of the reason why aggravated long share holders are hanging around and continue to accumulate shares .
If the speculation about PPHM technology success proves to be true, those that are still holding shares shouldn't need to worry about whether surprise accumulation is underway and a party shows up that has a large percentage of shares and a buyout offer. Remaining retail investors may find it served their interests by allowing accumulation of more shares at a lower pps. If the technology doesn't deliver as specualted, the only parties likely not to lose financially are the shorts.
Best wishes and IMO.
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