Page 399 - The Case Lab Book

said. "I apologize for any inconvenience this may create in lending markets
and I will probably resume lending at some point.

Happy Thanksgiving!"

The result was that share price almost doubled as a stampede among
those who were short the stock tried to find shares to cover their positions.
Many of these investors called for SEC action in response to this wild
trading. It was a penny stock in the first half of the month, by the end of the

month investors were acting as traditional bulls and bears as they fought it
out.

KaloBios had recently acquired the license for benznidazole, a standard
treatment for Chagas, a deadly parasitic infection most common in South

and Central America. The firm announced plans to increase the cost from a
couple of hundred dollars for two months to a pricing structure like that for
hepatitis- C drugs, which can run to nearly $100,000 for 12 weeks.

By mid-December, KaloBios’s stock was around $30. After Shkreli’s arrest,
however, the stock lost more than half its value.

On December 29, 2015, KaloBios filed for Chapter 11 bankruptcy. This
followed NASDAQ delisting its shares

Shorting the Stock

To short a stock, an investor borrows it from someone who is long. To

cover the short position, the investor must buy the shares back. The bet is
that the stock will fall in price, allowing the short seller to buy it back at a
lower price, and then pocket the difference. But if the share price instead

rises the short seller is left facing unlimited losses.

PUMP & DUMP