If you trade stocks at all, than you know that it’s possible to go long a stock (buy shares in that company), or short a stock (sell shares that you do not own, with the intention of buying them at a later date and lower price to cover that short position). Over the last several weeks it appears that several firms, some with a history, others seemingly popping up out of nowhere, have been recommending that traders short shares of Organovo (NYSEMKT:ONVO).
Organovo is a 3D bioprinting company that claims they will eventually be capable of 3D printing an actual human liver. The company already earns revenue selling 3D printed human tissue, which can be used in clinical trials.
Shares of the company have dropped over 50% from their highs in November of $13.65, bringing the market cap down to close to $500 million from a high of over $1 billion in November. Organovo, yesterday put out an official statement regarding the allegations made by several short selling firms, accusing them of publishing articles without trying to reach out to the company first. A snippet from the statement is below:
“Over the past two months, new and unknown firms have issued articles and reports on Organovo, without speaking to Organovo management for information or perspective on Organovo’s business or opportunities. One firm appears to have been formed in February 2014 and has not issued any other reports other than on Organovo; the other firm has a mailing address at a virtual, rent-an-office.”
“We have had the opportunity to review these reports in detail and can confirm that they contain inaccurate information and that they are exceptionally – and likely intentionally – misleading. Based on the source of the reports and the blatantly negative tone, we believe they were issued by or at the request of a short seller or short-sellers, who may profit from a decrease in Organovo’s stock price following the issuance of these kinds of reports.”
Short sellers can hurt a company’s prospects of raising additional funds on the open market. If Organovo wanted to raise funds right now, it would cost them twice as many shares as they could have raised those funds for back in November. At the same time, short selling is an integral part of the market, as it provides a sort of “checks and balance” mechanism to the market. Oftentimes though, firms will spend thousands of dollars in order to bring certain facts or theories to the attention of investors, driving the price of the stock down all the while they profit off of the stock’s decline. Market manipulation is not something anyone should be participating in.
One of the firms which Organovo was likely referring to, Simeon Research, gave a counter statement yesterday,
“Organovo’s management has chosen to attack our character rather than engaging in a substantive conversation about the merits of its company, technology, and past relationships with fraudulent brokers/promoters.”
“Its response makes a number of factually incorrect allegations. Our work is original and not commissioned by any third party. Although our work on Organovo was our first publication, we intend to focus on other names in the future. And we did in fact speak to Organovo’s IR to confirm certain parts of our work. Given Organovo’s own admitted lack of knowledge of our firm, we believe that making allegations against our character which have no basis in fact is grossly irresponsible.”
“It is troubling that Organovo has chosen the route of attacking us as opposed to our work. We believe this speaks for itself.”
For what it’s worth, Simeon Research does appear to have been created for the sole purpose of putting out negative articles about Organovo. Doing a simple Google search on the company shows that they have almost certainly been created with the intention to bring the share price of Organovo down. Whether they are trading on these actions or not, is unknown, but what other purpose could the company be doing this for? In the long run a company’s record will speak for itself, but right now short selling could be harming Organovo, as they may eventually need to raise additional funds for research and development of their 3D bioprinting technology. The stock is trading up 2% in pre-market trading as we publish this article. Discuss Organovo’s stock at 3dprintboard.
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