Some apparently orchestrated actions of various short selling funds have shaved tremendous value off the shares of Ampio Pharmaceuticals (AMPE). As usual, it is game on with the little retail investor caught in the middle.
On Wednesday, shares of the company rallied back to $6 after having dropped from $7 to $5 the previous day thanks to an anonymous blogger who posted an article admittedly designed to short the stock.
Prices rebounded hard the next day after it appeared that many of the allegations made against founder Michael Macaluso were ill-founded and misleading.
As someone who has recently written some hard hitting pieces designed to warn investors about the abuses of publicly traded firms out to hurt retail investors, I thought I'd weigh in here.
Ampio has been one of the best performing stocks on the Russell 3000 Index. I don't think this happens by accident. This isn't some OTC listed biotech penny stock in the business of selling snake oil to investors.
Ampio was founded by Dr. David Bar-Or. A respected scientist with countless published medical papers who hold over 52 issued U.S. and international patents, Bar-Or still serves as the company's director and chief scientific officer and is credited with discovering over 300 new therapeutic candidates, including Optina™ and Ampion™, both combined with estimated markets of over $20 billion.
Wall Street is a battle field where most everything is fair. But somehow the slander that may have taken place against Dr. Bar-Or and the rest of the extremely distinguished members of their management team should be criminal.
Because Ampio develops new uses for previously approved drugs and new molecular entities ('NMEs') for important therapeutic areas, the firm has been able to push pipeline timelines along more quickly than most other firms in biotech.
They have earned their stripes and have several mid and late stage clinical trials underway and when biotech bloggers and writers started to cover the story of Ampio earlier this year, many investors - both retail and institutional - began to acquire shares.
No matter what the known shorts would have you believe, the fact is there are at least 27 institutional investors holding shares of the company. The science is real, currently undergoing FDA-approved clinical trials, and the market potential here is tremendous.
Again, I'm all for whistle-blowers who expose fraudulent firms and their management teams - I'd like to proudly consider myself as one of them - but the motives for spooking Ampio investors out of their shares this week appear to be far more self-serving.
Some of the false pronouncements in these articles written by known short sellers appear to be vastly incorrect and misleading, and in some instances baseless and false.
Fundamentally, what changed at Ampio during the last 72 hours? Absolutely nothing.
Still, shares are now trading at a vastly discounted price because some blogger who disguises himself under a pseudonym wrote - among other things - that the firm's latest 10-Q filing reveals that "12 million of Ampio's 28 million outstanding shares will be coming off lockup in June of 2012."
Unfortunately it appears he ended up hurting AMPE share prices more than if his nightmare scenario had actually played out. And the retail shareholders who took him at his word probably had to sell at a financial loss.
The truth is $12 million shares DO NOT come off lock-up in June 2012. In fact, significant events in the first half or 2012, including the results of not one, but two major clinical trials, are set to impact AMPE's share price.
As such, Ampio's management agreed to extend their lock up to accommodate the requests of the DMI BioSciences (BioSciences) shareholders until July 15, 2012 - thereby forfeiting any SEC programmed selling in exchange for 1 million shares being included in a future offering. Come that date in July, insiders will still not be able to sell without an SEC-approved selling program.
In March of this year, Ampio acquired all of the outstanding stock of BioSciences for 8,667,905 shares of Ampio common stock, the "merger stock," in part because Biosciences had neither the resources nor the intent to conduct clinical development of the products in their portfolio. It's important to note that 99.9% of the shareholders approved that transaction.
Boldly, the anonymous writer goes on to state that Ampio Pharmaceuticals is now "in the same dire straits as BioSciences with limited options and that Ampio has burned over $10 million in the last 12 months and has roughly $5 million, or one to two quarters of cash left until the company is, in our opinion, flat broke."
I don't know where he pulled those "facts" out of, but it appears to me that he may have had to remove his underwear at some point in the process. In either case, great damage has been done.
The inconvenient truth is that as of the last published 10Q, the company has approximately $7 million in the bank and is only burning $500,000 per month. With the expensive Ampion™ trial set to end in January, I would imagine that will significantly reducing burn rate.
At the end of it all, I'm only begun scratching the surface and already looking at far too many erroneous statements and mis-representations. These guys get an "A" for effort and managing to shave $100 million off the market cap of the company, but an "F" for research and factual data.
In a publicly traded equity with millions of dollars of investors' monies at stake, I am left hoping that this sort of fiscal vandalism is taken seriously.
To the shorts, I'd propose that if they're going to bash a company for their own financial gain, that they at least make sure they get the verifiable, black and white facts straight. I can't say with certainty that this was a case of libel or slander, that will be for the courts to decide. But I can say that many of the facts here are at the very least misleading.
To my fellow retail investors, I'd propose that this become yet another lesson in the value of doing your own homework and research.
In fact, start by reading the safety data in this recently published article and comparing it to the latest round of fires the shorts have attempted to start. I'm sure you'll agree that many of the European Journal Article clearly addresses any academic questions about efficacy and clearly demonstrates positive clinical effect.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.