We believe shares of Abeona (NASDAQ:ABEO) are objectively without value and apparently exist to enrich insiders at the expense of investors. This report is the second installment in our ongoing coverage of the ABEO stock promotion, and will focus exclusively on those responsible for perpetrating this stock promotion. Future reports will further elaborate on why ABEO's science is unviable and set to fail.
When investing in speculative, cash burning, biotech stocks with unproven science and many years of failure, everyone would agree it is critical to understand the quality of the people in charge. Even a valuable product or business, if run by questionable people, will likely end up wiping out shareholders. Stock market history is littered with the corpses of businesses which had a chance but failed and disappeared permanently due to poor management. We believe ABEO's science is obviously unviable but even if you disagree on that point, it is vital that you understand the people in charge of this company who you have entrusted your savings with as an investor.
ABEO Director Mark Ahn: Subject of SEC Investigation Regarding Illegal "Pump & Dump" Stock Promotion
We believe that ABEO shareholders are completely unaware of an 8-K filing that was snuck out during the holiday season, which appears to disclose that current ABEO Director Mark Ahn and the company he was previously the president and CEO of, Galena Biopharma (GALE), have agreed on a proposed settlement regarding the SEC's long-running investigation of his alleged commissioning of an illegal stock promotion where he dumped many millions of dollars of personal stock in alleged violation of securities laws.
Specifically, we quote the 8-K:
"On December 22, 2016, Galena Biopharma, Inc. (Galena) and its former Chief Executive Officer (CEO) reached an agreement in principle to a proposed settlement that would resolve an investigation by the staff of the Securities and Exchange Commission (SEC) involving conduct in the period 2012-2014 regarding the commissioning of internet publications by outside promotional firms."
GALE mysteriously did not include Mark Ahn's name in the 8-K so it is not stated clearly but we don't see how the "former Chief Executive Officer" during 2012-2014 it is referring to in the 8-K is possibly anyone other than ABEO's current Director, Mark Ahn since Mark Ahn was the previous CEO of GALE during the time period.
What's even more alarming to us is that none of these events, including Mark Ahn's questionable background, have been disclosed to ABEO shareholders that we're aware of, not to mention that Ahn remains on the board of ABEO to this day despite the legal swamp he has found himself in. We strongly believe all legal matters, federal investigations, and/or securities fraud lawsuits involving ABEO directors should be made immediately known to ABEO investors. In the spirit of full disclosure and transparency, we'll once again lend a hand to ABEO shareholders based on this publicly available information so they are hopefully able to make more informed investment decisions in the future about who they have entrusted their wealth to.
Let's review the timeline of events, which in our view, ultimately resulted in GALE shareholders losing substantial amounts of value since Mark Ahn joined the company. Recall that many of Rouhandeh's prior stock promotions ended similarly at essentially zero, and in our opinion, there is a very clear pattern here. Readers needing a full refresher on the substantial shareholder value destruction that Rouhandeh has wrought on the capital markets over time should read our initial report debunking ABEO, which can be found here.
Mark Ahn joined GALE in 2007 serving as a director of the company, and in 2011, Mark Ahn entered into a new role to serve as GALE's president and chief executive officer. Shortly after taking these leadership positions, numerous Seeking Alpha articles were published blatantly promoting GALE. These articles seemed to create quite the internet buzz as shown by Google Trends:
Source: Google Trends
There's no doubt this was a serious stock promotion based on the public lawsuits. Court documents showed that the stock promoters that Mark Ahn allegedly commissioned published a total of 50 unique "GALE-centered blogs" that were distributed through various investment sites. The stock promoters that Mark Ahn allegedly commissioned also apparently paid other people to tout GALE on message boards as well as Facebook (NASDAQ:FB) and Twitter (NYSE:TWTR) as outlined in the 2015 complaint for violations of securities laws against Galena Biopharma, Mark J. Ahn and others.
We strongly encourage ABEO shareholders to review the following chart closely as it details how over $750 million of value was destroyed by Ahn and promoters involved at GALE since the height of the promotion. The key takeaway here is that ever since Mark Ahn involved himself with GALE, it has lost substantially all of its value:
Eventually, after he blew out of $3.8 million worth of stock during the alleged stock promotion, Mark Ahn became a named defendant in at least two securities fraud lawsuits:
According to Lexis Legal News, GALE shareholders that had been burned by the promotion alleged the following:
Source: Lexis Legal News
Based on the series of events that occurred, it should be no surprise that these lawsuits resulted in a $20 million settlement, which is unfortunately only a fraction of the $750 million in value lost since the height of the promotion.
What we find highly alarming are the allegations of what appear to us to be a series of flat out "inconsistencies" told by Mark Ahn during this whole disaster, as profiled by court documents. We present some of the most relevant quotes below for you so that you can come to your own conclusions. For more detail, we recommend that you read the lawsuit in its entirety. Please carefully comprehend these events and allegations:
Source: [Case 3:15-cv-01748-AC]
Remember that Mark Ahn has been on the board of ABEO while all of these events were going down. These events were well publicized and thoroughly reported. So why didn't Rouhandeh, ABEO's chairman, give Mark Ahn the boot from the Abeona board? Who needs an apparently SEC investigated, alleged insider trader, defendant of a securities fraud lawsuit and alleged liar on the board of their company? We can't explain how this would possibly be in the best interest of shareholders, but our best guess is that Mark Ahn's stock promotion skills have been of critical importance to the ongoing promotion at ABEO.
Round 2: ABEO (aka PTBI & ACCP) Touted by the Same Stock Promoters That Pumped GALE
Yes, Mission IR, a related company to the disgraced Dream Team Group also was part of the ongoing ABEO stock promotion. We have seen numerous other Mission IR/Dream Team Group promotions get wiped out and we believe ABEO will certainly be among them over time.
Of course, ABEO doesn't provide disclosures for what companies it paid for investor relations, but we know Mission IR has covered ABEO, and we highly doubt Mission IR was touting ABEO's prior two tickers for free:
Source: Mission IR
Source: Mission IR
ABEO has spent a truly ridiculous amount of shareholder cash on investor relations expenses over the years. In 2015 alone, the company spent at least $1.2 million on investor relations, which dwarfs the amounts that GALE/Ahn had spent on their stock promotion that preceded GALE's stock getting pummeled. As you remember from our first report, historically, a large portion of ABEO's investor relations fees and/or services have actually been paid to Rouhandeh entities - in fact, we believe that ABEO appears to us to exist so that Rouhandeh and other insiders can funnel cash out of the company for their own benefit, something we covered extensively in our first report on ABEO. Recall, several prior Rouhandeh stocks essentially went to zero as failed entities and were later rolled into ABEO. Do ABEO investors think this time will be any different? Do they not think that the SEC is watching Mark Ahn very closely after the stunt he pulled with GALE? If Rouhandeh's stock promoter days are really a thing of the past and nothing to worry about (as the Jefferies analyst Gena Wang wrongly concludes - more on Gena below) then why is he electing some of Wall Street's worst stock promoters to be on the Board of Directors of ABEO?
Sell-Side Analysts Defending ABEO Have Embarrassing Track Records and Were at the Epicenter of the China Stock Fraud Bubble
Recently, sell-side analysts have been attempting to defend ABEO, initiating favorable coverage and assigning outlandish price targets. In December, Cantor Fitzgerald "analyst" Elemer Piros stated that our report that debunked the ABEO bull case was "factually incorrect and misleading" and maintained his buy rating and price target of $21. We laughed when we read the Piros piece because he did not even understand the argument we made in our first report, though we'll come back to that in our next piece on ABEO's science. More recently, Jefferies "analyst" Gena Wang came to ABEO's defense, initiating coverage, rating the shares a buy with an $11 price target.
We think investors have wrongly assigned too much credibility to the words of these two analysts given the obvious conflicts of interest and the history the two share as part of the same team at Rodman & Renshaw that regularly touted Chinese life sciences companies that turned out to be terrible investments, in our view. Below, you can see that both Gena Wang and Elemer Piros have some of the worst track records as analysts according to TipRanks:
Further, we believe investors in ABEO are unaware that both Gena Wang and Elemer Piros previously worked together at Rodman & Renshaw, a low-quality sell-side shop that shamelessly promoted Chinese reverse merger stocks before they were eventually exposed as frauds by professional investors. Many investors know that Rodman & Renshaw declared bankruptcy some years ago as a direct result of the alleged Chinese fraud enablement it participated in.
We believe Gena Wang and Elemer Piros served as key players in the Rodman debacle given that they appear in a research piece that assigned "Market Outperform" ratings to several Chinese life sciences companies that in aggregate severely underperformed the market.
Below, you can see that in this report, Piros and Wang had rated these companies "Market Outperform":
So what would have happened if you had made an investment in each of these companies, blindly following the investment recommendations of Wang and Piros and held them for the next two years? We'll let the charts speak for themselves:
Source: Capital IQ
Source: Capital IQ
Source: Capital IQ
In our view, there is a clear and relatively consistent pattern emerging from these recommendations. Not only did these investments lose a substantial amount of value over the following two years from the date of the report but they also significantly underperformed the IBB by a wide margin. Look at this chart closely: the amount of negative alpha created by the Piros and Wang picks is so severe that the chart becomes distorted and it's easy to miss that many of these stocks underperformed the index by nearly 150% in just a few years, not to mention that several of the stocks essentially got wiped out.
Source: Capital IQ
The key takeaway here is that investors would have fared much better if they would have simply ignored the advice given by these two and instead invested their money in the Nasdaq Biotechnology ETF (NASDAQ:IBB). We recommend indexing as a superior alternative to anyone long ABEO shares.
There is not much else to say about Gena Wang and Elemer Piros, in our view, but we view their coverage as a red flag. We recommend extreme caution to anyone considering an investment in ABEO stock.
We are downgrading shares of ABEO to Strong Sell from Sell and reducing our price target to zero as the people involved here are far worse than even we had thought, which makes it crystal clear to us what ABEO really is. We believe this stock will end similarly to prior Ahn and Rouhandeh efforts and find its way to essentially zero over time. Yes, ABEO has some cash, but like prior efforts, we believe this will mostly evaporate through various self-enriching wealth transfers from shareholders to insiders.
Stay tuned for the next several installments in our ongoing coverage of ABEO, which will detail numerous additional problems with the company's science and ongoing misunderstandings about ABEO's data and trials that persist in the investment community.
Disclosure: I am/we are short ABEO.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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