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The founding members of Chimera Research Group have over 50 years of combined experience in the biotech and pharmaceutical sector. Their experience includes work at Investment Banks, Hedge Funds, Pharmaceutical Companies, top-tier Universities, and the U.S. Food and Drug Administration (FDA).... More
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  • APPY Options Appear Mispriced into Results 2 comments
    Apr 11, 2010 10:43 PM | about stocks: APPY
    APPY is slated to report top-line results for AppyScore by mid-May.  Based on a quick analysis, options appear to be significantly mispriced and do not currently represent potential upside based on historic valuation benchmarks. 

    In January 2009, prior
    to results on AppyScore (which were ultimately viewed unfavorably by the market causing the shares to plummet), the market collectively valued APPY at $238 million (= fully diluted shares outstanding of 31.2 million(1) x $7.63 share price(2)).  Let’s assume this represents a base valuation for AppyScore and let’s also assume that the value of this technology has not changed substantially since January 2009.  If we take the $238 million value and divide by today’s fully diluted shares outstanding of 37.5 million(3), we get a price per share of $6.34.  Options are currently only pricing an upward move of around $0.75~$1.00 from Friday, April 9, 2010’s closing price of $2.33.  If results are positive, the shares should logically trade north of this $6.34 value at the very least (assuming our assumptions are valid).  

    The market is apparently not very confident in the up-and-coming results.  This may represent a very low risk / high reward trade for Call option buyers.  

    Notes:
    (1)  As of December 31, 2008.
    (2)  Closing price as of January 16, 2009.
    (3)  As of March 5, 2010.



    Disclosure: Long APPY Call Options
    Stocks: APPY
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Comments (2)
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  • Dan Weiss
    , contributor
    Comments (93) | Send Message
     
    Im also a fan of the May 2.5 call options which are priced very inexpensive for a major pending event.
    20 Apr 2010, 10:12 PM Reply Like
  • Chimera Research Group
    , contributor
    Comments (385) | Send Message
     
    Author’s reply » Someone appears to be a very big fan of the June 2.5 Calls based on today's action.
    21 Apr 2010, 06:15 PM Reply Like
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