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The enormous advancement in the biological sciences that is taking place has begun to change the traditional way of practicing medicine. Far-reaching biological products are being approved and news about breakthroughs are occupying the media headlines. However, selecting the biotechnology firms... More
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  • SEQUENOM: WHY HAVE SHORT SELLERS PANICKED? 0 comments
    Jun 11, 2009 9:05 AM | about stocks: SQNM

    The Sequenom (SQNM) story is written now by short-sellers who are really not sure why they short this firm, except that it is their way of investing. The title we suggest for the short selling story is “gamble based on deadlines and rely on the plenty of gossipers who love bad news and perpetrate them." In the case of Sequenom, negative investors rely on the fact that the deadline indicated by Se-quenom to validate its Down syndrome non-invasive diagnostic test is near year end. From now until that time, they will rely on making sure that hundreds of articles will be posted against the firm, its management and its Down syndrome test on the internet. They will make sure that nothing will be said about two other embryonic tests that are no less important than the Dawn syndrome non invasive diagnostic test. 

    To the bad luck of those who shorted Sequenom, the news that came this time  (true or false it does not matter) was positive for the company. The reaction of negative investors cannot be described except as reflecting panic. They rushed to protect their investment, buying the stock like crazy, hence causing the rally themselves. They are now selling at the higher price, taking profit, and shorting again.  Good for them.

    The question is: If those negative investors were confident that the firm is bad and the test is bad as they have been suggesting in their Internet postings, then why they panicked?

    When the stock rallied from $3.50 to $5.50 they panicked without calling it a rally. When the stock lost one dollar out of the two gained to profit-taking, they  rushed to say  that SQNM has tumbled, insinuating that the stock would definitely continue to slide.  

    We do not know what would happen if the good news about the three tests come earlier than expected. What we are sure of, though, is that the rally this time will be unparalleled.

    Because this investigation, like all investigations,  will eventually come to an end. and the ongoing trials will  do the same,  rumors in this case are no rumors. Everybody knows that the investigation is closer to the finish line today than last month and so are the trials.   

    It is true that Sequenom had said in April it would delay the launch of the test due to mishandling of R&D data by some employees. However, nobody can claim knowing that those employees have committed any crime. We also agree that the timelines the company has provided in April had not changed and that the company still expects to have a revalidated Down syndrome test by the fourth quarter of 2009. This is, indeed, good news as it has been recently ascertained by Sequenom.

    Good luck for everybody who takes advantage of this story, especially the vul-nerability of those who are shorting the stock as a matter of addiction to shorting.  In any case, when the Dawn syndrome test will be validated and if it was not Dawn syndrome test alone, but two other non-invasive tests for embryos, a small investment in this firm could turn big.

    Such an opportunity does not frequently exist.

    Disclosure: No positions

    Themes: Biotechnology, Biotech Stocks Stocks: SQNM
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