Dendreon (DNDN) is a difficult stock to own ... ask anyone who is or was a shareholder. The history of this company and its travails with the FDA, SEC and the stock market are enough to drive one to drink, if not to a shrink. Not that the company hasn't contributed to the problem.
But even its most ardent critics would be remiss if they didn't acknowledge (1) the strange activities surrounding the Provenge Advisory Committee meeting of March 29, 2007; (2) the internecine warfare between the FDA's then-CDER/ODAC (Pazdur) and CBER; (3) the letters written by special government employees Drs. Howard Scher and Maha Hussain to then-Commissioner Andrew von Eschenbach disparaging Provenge (the letters, you will recall, that were leaked to and published by The Cancer Letter either prior to or just after their delivery), and (4) the counter-intuitive put trades by seven hedge funds (that is, large bets against approval) reported to the SEC as of March 31, 2007, by, for example, Bernie Madoff's BLMIS (180,000 puts; yes, dear readers, Bernie actually made some real trades) and Sigma Capital Management, a part of S.A.C Capital Management, LLC (750,000 puts). You'll find the entire sordid tale here as well as an update in Mark Mitchell's recently released book, The Dendreon Effect, which is available from online bookstores such as Amazon.com.
And then, there's always the thrill of a Bear Raid, including the one on April 28, 2009, when the stock plunged from $24.50 to $7.50 in (wait for it) 75 seconds. FINRA let the trades stand and the SEC did nothing until Sen. Chuck Grassley went to the SEC's Office of the Inspector General in late summer, 2009, and demanded an investigation into why the SEC's Enforcement Division hadn't looked into the matter. The result was Report OIG-521. You'll see that the last page is redacted. This is because, according to the cover letter I received when I FOIA'd the Report, that to release the information would compromise an ongoing investigation. (My most recent FOIA request for more information (the response was received last month) was rebuffed, and I was told to refile in six months.)
Manipulation, thy name is Wall Street!
Which brings us to last Wednesday, May 16, 2012. Immediately after the markets closed, several members of the "press" and the Wall Street community were issuing statements that the SEC was investigating Dendreon. Here's what I received as a SeekingAlpha alert:
- Wednesday, May 16, 5:31 PM Shares of Dendreon are trading lower after hours on unconfirmed rumors that the SEC has opened a probe on the company's disclosures. While the company did disclose a formal SEC probe in its May 7th 10Q filing, details may be finally making the rounds. Shares -1.4% AH.
The timing is interesting. The "unconfirmed rumors" began circulating just when after-hours trading began ... a time when liquidity is low and the market makers can take the bid down quicker than the blink of an eye.
Interesting, too - and importantly - is the fact that this week is options expiry…a time when the markets are ripe for manipulation. (If you don't think so, ask Eliot Spitzer about the Wall Street firm he nailed in 2003 for manipulating the common stock of Genta Corporation (OTC:GNTA) on May 16, 2002…just before options expiry.)
Here's the Dow Jones story on Dendreon and the "rumors." In part, it says:
"Dendreon Corp. (in its 10Q) said the U.S. Securities and Exchange Commission has begun a formal investigation, which may be related to shareholder lawsuits alleging the company misled investors about prostate-cancer drug Provenge."
And here's what can be found in Dendreon's 10Q, which was available on May 7. To wit:
"The company has also become aware that the Securities and Exchange Commission ("SEC") has commenced a formal investigation, which the company believes may relate to some of the same issues raised in the securities and derivative actions. The ultimate financial impact of these various proceedings if any is not yet determinable and therefore, no provision for loss, if any, has been recorded in the financial statements. The company has insurance that it believes affords coverage for much of the anticipated costs of these proceedings, subject to a $1.5 million self-insured retention and the policies' other terms and conditions." (Again, you can view the entire 10Q."
The fact of the matter is, Dow Jones "broke" the news a week late. And after normal trading hours, at that.
The timing is both questionable and impeccable. I don't know that we'll ever know what happened in this case. Did someone call Mr. Loftus and tell him to take a closer look at the Dendreon 10Q?
Or did the story originate with Adam Feuerstein, whom Loftus quotes: "TheStreet.com columnist Adam Feuerstein mentioned the SEC investigation on Twitter Wednesday."
Here's what can be gleaned from the ether:
Loftus (on WSJ) ... "TheStreet.com columnist Adam Feuerstein mentioned the SEC investigation on Twitter Wednesday. "
Feuerstein (on Twitter) ... "Loftus posted a Dow Jones story on the SEC investigation of $DNDN. Looks like I was first to break the news. Gotta read those Qs closely!"
It's a little difficult to know the exact timing. But one thing's for sure: both men are making hay out of old news ... something that the markets had fully digested by May 8 (or should have) and that now was being recirculated and sensationalized for the purpose of manipulating the stock on options expiry.
Just another day in the life of a Dendreon shareholder.
Where are the SEC and FINRA? Better, where is Eliot Spitzer when we need him?
The daily chart, courtesy StockChart.com, is below. The stock appears to be pinned around $7.50 for options expiration. The stock is oversold. The MACD is negative. Importantly, the gap opened at the beginning of the year has been filled.
On the weekly chart, the stock is approaching oversold territory, and the MACD is neutral.
"Dendreon said in its quarterly report filed with the SEC last week the lawsuits - which have been consolidated in federal court in Washington state - generally allege that Dendreon and certain current and former officers made materially false or misleading statements about the market launch of Provenge." (emphasis added)
Additional disclosure: I am long DNDN and will not alter my position within 72 hours of the time of publication of this article. I am not a registered investment advisor and do not provide specific investment advice. The information contained herein is for informational purposes only. Nothing in this article should be taken as a solicitation to purchase or sell securities. Before buying or selling any stock you should do your own research and reach your own conclusion. It is up to investors to make the correct decision after necessary research. Investing includes risks, including loss of principal.