For those reading because they saw the word "naked" and thought, 'ooh, this looks exciting', you're going to be disappointed. The naked story I'm referring to is about naked short selling. If the thought of Munchkins or Oompa Loompas running around a trading floor in their birthday suits excites you, then stop reading right now and get help.
Before I go on though full disclosure up front, I am a BIG BULL on Resverlogix and hold what for me represents a significant position, both in shares and share purchase warrants. So please read this with that in mind.
I genuinely believe that if the ongoing BETonMACE Phase III Trial for patients with Diabetes Mellitus succeeds in achieving its primary end point that the sky could literally be the limit.
This event based trial is projected to be ending later this year with top line data expected sometime around December. If Apabetalone is able to show 30% or better Relative Risk Reduction (RRR) in the incidence of Major Adverse Cardiac Events (MACE) I don't think a share price of $10 CDN is unrealistic at all, in fact it may very well be incredibly conservative.
News just came out on Thursday indicating that the FDA is on board with the trial and has indicated that Apabetalone has a pathway to an NDA filing and ultimate approval if BETonMACE succeeds.
News just came out on Thursday indicating that the FDA is on board with the trial and has indicated that Apabetalone has a pathway to an NDA filing and ultimate approval if BETonMACE succeeds.
And that could be just the start in this writer's, not always so very, humble opinion.
- There are future trials planed for Chronic Kidney and Fabry's diseases.
- The company recently highlighted the potential for Apabetalone to treat HIV.
- There's last year's news about Pfizer including Apabetalone in a European patent application for the treatment of Friedreich's Ataxia disease, a condition that causes deterioration of the nervous system.
- The current BETonMACE trial includes a subset of patients over the age of 70 who will be tested for potential treatment of Neurodegenerative Diseases such as Alzheimer's.
- Saint Louis University conducted research which showed Apabetalone may have potential application in the treatment of a rare form of Muscular Dystrophy called Facioscapulohumeral Muscular Dystrophy or FSHD.
- There are numerous scientific publications outlining the potential for Apabetalone across a variety of indications in conditions like Thrombosis.
How much could a drug like Apabetalone end up being worth?
I see massive potential, literally in at least the tens of billions of dollars (US Dollars not Loonies) for annual revenue, and possibly even more than $100 billion USD.
Proud Canucks already know that it was this country that produced Dr. Fredrick Banting, the man who discovered Insulin for the treatment of Diabetes at the University of Toronto. I see even bigger potential for Apabetalone.
Okay okay, I can already hear the clucking tongues of the cynics. If Apabetalone has such unbelievable potential why isn't the market cap of this Canadian based biotech in the billions like other development stage drug companies? Resverlogix currently has a market cap of just over $330 million CDN, or a little over $260 million in USD.
Why isn't Resverlogix worth more at this stage?
It is my opinion that manipulative Naked Short Selling resulting in significant delivery failures has had a substantial and negative impact on the company's PPS. And I can back that up with proof.
But before I get to the actual trading data and other documentation about the Naked Short Selling of RVX.TO I want to explain how it works and how damaging it can be.
Short selling is a legitimate and perfectly legal practice of borrowing shares from shareholders and selling them back into the market in the hopes of buying them back later at a lower price and thus realizing a profit on the difference. Its the inverse of buying low and selling high. Instead shorts first sell high and then hope to buy back lower, that's called the cover. Short selling is actually beneficial, it improves liquidity and helps moderate volatility.
Naked short selling on the other hand can be incredibly manipulative because it involves selling short but not actually borrowing the shares and delivering them to buyers. The ultimate result of a Naked Short Sale is a 'Failure to Deliver'. In effect Naked Short Sellers are taking money for selling something that doesn't exist.
In the United States there is a Locate Requirement for going short. Those wishing to sell shares they don't own are supposed to first make a reasonable effort to ensure that the shares they are selling, that they are in fact available to be borrowed. As far as I am aware no such regulation exists in Canada.
Even with the Locate Requirement in the US though, delivery failures still take place. To remedy the situation a Threshold List is published on sites like Nasdaq.com which enumerates those stocks that have had persistent delivery failures.
On Canada's big board TSX there is another facility for settling delivery failures, and it is here that we find the proof that RVX.TO has been the subject of repeated, substantial and on-going delivery failures for some time now.
We Canucks have TSX Buy-Ins to support the Canadian Depository for Securities or CDS for short. The CDS is the Canadian equivilant of the American Depository Trust Company or DTC.
"TSX Buy-Ins" transacts sales through trading house number 100 at a 10% premium to the market price each day around 3PM. You can read about it by clicking on the link in the over sized words TSX Buy-Ins above.
"TSX Buy-Ins" transacts sales through trading house number 100 at a 10% premium to the market price each day around 3PM. You can read about it by clicking on the link in the over sized words TSX Buy-Ins above.
When TSX listed stocks have been subject to delivery failures a trade that locates alternative sellers capable of delivering the security in question takes place, thus allowing the CDS to clear the failed position.
The premium is 10% over the last price before the 3PM time.
NOW THE PROOF
Here is a cut and paste of all the TSX Buy-Ins done through this broker #100 to satisfy delivery failures over the past month, I can only generate one month's trading at a time.
| Broker Positions for C:RVX Broker #100 from 20180515 to 20180615 |
| Date | Bought | $Val | Ave | Sold | $Val | Ave | Net | Position | $Net | $Position |
|---|---|---|---|---|---|---|---|---|---|---|
| 20180515 | 15,600 | 21,840 | 1.40 | 0 | 15,600 | 15,600 | -21,840 | -21,840 | ||
| 20180517 | 15,600 | 25,272 | 1.62 | 0 | 15,600 | 31,200 | -25,272 | -47,112 | ||
| 20180522 | 3,000 | 5,160 | 1.72 | 0 | 3,000 | 34,200 | -5,160 | -52,272 | ||
| 20180523 | 55,500 | 87,135 | 1.57 | 0 | 55,500 | 89,700 | -87,135 | -139,407 | ||
| 20180524 | 4,000 | 6,600 | 1.65 | 0 | 4,000 | 93,700 | -6,600 | -146,007 | ||
| 20180528 | 14,400 | 23,904 | 1.66 | 0 | 14,400 | 108,100 | -23,904 | -169,911 | ||
| 20180529 | 26,200 | 38,514 | 1.47 | 0 | 26,200 | 134,300 | -38,514 | -208,425 | ||
| 20180530 | 22,800 | 33,060 | 1.45 | 0 | 22,800 | 157,100 | -33,060 | -241,485 | ||
| 20180531 | 36,900 | 45,756 | 1.24 | 0 | 36,900 | 194,000 | -45,756 | -287,241 | ||
| 20180601 | 32,500 | 46,475 | 1.43 | 0 | 32,500 | 226,500 | -46,475 | -333,716 | ||
| 20180604 | 30,000 | 43,200 | 1.44 | 0 | 30,000 | 256,500 | -43,200 | -376,916 | ||
| 20180605 | 37,400 | 54,604 | 1.46 | 0 | 37,400 | 293,900 | -54,604 | -431,520 | ||
| 20180606 | 41,400 | 62,100 | 1.50 | 0 | 41,400 | 335,300 | -62,100 | -493,620 | ||
| 20180607 | 24,100 | 34,945 | 1.45 | 0 | 24,100 | 359,400 | -34,945 | -528,565 | ||
| 20180608 | 13,000 | 20,800 | 1.60 | 0 | 13,000 | 372,400 | -20,800 | -549,365 | ||
| 20180611 | 71,300 | 132,618 | 1.86 | 0 | 71,300 | 443,700 | -132,618 | -681,983 | ||
| 20180612 | 60,600 | 111,504 | 1.84 | 0 | 60,600 | 504,300 | -111,504 | -793,487 | ||
| 20180613 | 6,000 | 11,460 | 1.91 | 0 | 6,000 | 510,300 | -11,460 | -804,947 | ||
| 20180614 | 62,500 | 117,500 | 1.88 | 0 | 62,500 | 572,800 | -117,500 | -922,447 | ||
| 20180615 | 29,400 | 61,446 | 2.09 | 0 | 29,400 | 602,200 | -61,446 | -983,893 | ||
| TOTAL | 602,200 | 983,893 | 1.634 | 0 | 602,200 | -983,893 | ||||
Here's the previous month long period.
| Broker Positions for C:RVX Broker #100 from 20180416 to 20180514 |
| Date | Bought | $Val | Ave | Sold | $Val | Ave | Net | Position | $Net | $Position |
|---|---|---|---|---|---|---|---|---|---|---|
| 20180426 | 3,000 | 4,380 | 1.46 | 0 | 3,000 | 3,000 | -4,380 | -4,380 | ||
| 20180511 | 3,000 | 4,560 | 1.52 | 0 | 3,000 | 6,000 | -4,560 | -8,940 | ||
| TOTAL | 6,000 | 8,940 | 1.49 | 0 | 6,000 | -8,940 | ||||
Obviously it is with more recent trading that these trades to satisfy delivery failures have been taking place, for the past 15 days in a row inclusive to this past Fridays trading of June 15th 2018.
Notice that this Broker #100 only buys and never sells. That's because the sole purpose of these trades is to satisfy delivery failures, where sellers have sold shares that did not exist. Its is to rectify Naked Short Selling in other words.
I must at this point give credit to a message board poster at Agoracom who's user name is GolfYeti. It was this individual's sharp eye that noticed these trades taking place at a 10% premium and brought it to the hub's and my attention. I have since expended my OCD energy in researching it.
If you go to the following link you can click to see an Excel Spread sheet which lists stocks trading on Canada's Venture and TSX exchanges that are on the buy in report. The quantity for the report dated June 15th 2018 is 673,600 while yesterday it was at 1,100,900 That's a lot of Naked Short selling obviously.
Take note, that this is not regular short selling that's being reported here, but Naked Short selling where the market players involved failed to deliver the shares they sold. Regular short selling is reported twice a month on the 15th and last day of each month with the actual numbers coming out three days later. That number up to May 31st 2018 was 1,655,332 according to stockwatch.com
Why did this happen and why is it important?
First the why. The catalyst that coincides with the increase in both regular short selling and naked short selling seems pretty definitively to have been an April 17 News Release that announced a "Proposed Offering of Units". Prior to that news coming out the number of shares reported as being sold short (normal shorting not naked) was a piddly little 176,205 up to April 15th 2018.
Here's that PR of April 17th:
When the next update came that included short interest up to April 30th the number of shares that had been borrowed and dumped back into the market had exploded higher to over 1 million, 1,191,433 to be precise according to the numbers I get from stockwatch. When the next update came out the short number was still at 1,147,392 up to May 15th. Which takes us up to the most recently available number of over 1.6 million up to May 30th. The next update should be out next week either Wednesday or Thursday when we'll know how many were short up to this past Friday June 15th.
Why is it important? For a development stage company, especially one in the biotech field trying to develop a drug for the treatment of Cardiovascular disease, having a healthy share price makes accessing much needed capital easier. Some would call taking money for something that is not delivered, they would call it fraud. Apabetalone isn't some flashy but ultimately useless tech gadget.
Why is it important? For a development stage company, especially one in the biotech field trying to develop a drug for the treatment of Cardiovascular disease, having a healthy share price makes accessing much needed capital easier. Some would call taking money for something that is not delivered, they would call it fraud. Apabetalone isn't some flashy but ultimately useless tech gadget.
So why would shorts attack RVX after the Proposed Share Offering?
In my opinion its simple, shorts were thinking they could turn a quick buck. Resverlogix did a share offering last June that resulted in almost the exact same situation. An offering was proposed and then carried out involving the sale of shares and warrants, and short interest spiked. Those participating in that financing, in my opinion they went short and turned a quick buck, selling both the shares from the financing, the warrants and additional shares that were borrowed short and dumped.
RVX tanked and they were able to cover and make bank, bully for them.
RVX tanked and they were able to cover and make bank, bully for them.
I am no boy scout and I don't believe those who have gone short on RVX both with borrowed shares and naked with shares that don't exist, I don't think they're choir boys either. Its all about turning a buck, making bank, kaching kaching.
What's the difference between some Street Players and the guy who holds up a gas station? The guys on Bay and Wall Streets wear suits and ties, either way they're mercenaries in my eyes. That's not a value judgement for me, its simply a recognition of reality.
The public markets are full of companies doing everything they can to get noticed in order to sell shares to the public, prop up their share prices and earn company execs a nice living often 7 figures. Emailing chop shops, stock promoters, writers and analysts, IR firms that specialize in getting the attention of the investing herd, all part of the market machinery.
All is fair in love and war, I'm dollars to donuts certain that Sharks on The Street see Resverlogix as little different from some bogus Cannabis company with a greenhouse somewhere in Podunk Arkansas that's hyping itself as the next big thing in medical Mary Jane.
There are too many public companies out there for the pros to invest the time, effort and money in doing genuine research, scalping is easier and more cost effective.
There are too many public companies out there for the pros to invest the time, effort and money in doing genuine research, scalping is easier and more cost effective.
I think Resverlogix is different, but that's based on countless hours of research and due diligence.
Even still, I know that it could ultimately fail, that the BETonMACE trial might not achieve its primary end point. Its a risk I'm willing to take because if they do succeed I'm of the opinion that my shares could ultimately be worth not just $10s but perhaps $100s of dollars in the years to come.
Were it not for persistent short selling, both regular and naked I think they might have already achieved a MC of perhaps $1 billion CDN. But it is what it is, you can't change the past.
I sincerely hope Apabetalone is a raging success, not just for the sake of my bank account, but because of the good it could do. Diseases like diabetes are insidious, my late great father suffered from it and was on insulin. Diabetics often end up progressing to Kidney Failure, and then to Cardio-Vascular disease. The "gunk" that builds up in our veins, calcification and the like....its like the top of a waterfall cascading downwards into various pools, into all manner of different areas and conditions.
An epigenetic drug like Apabetalone, able to selectively zero in on a specific bromodomain and recruit proteins to turn a diseased gene from the off position to on? WoW!!! I hope it works.
If you've signed up for those emails that promise winning picks, that shamelessly talk about sharing prosperity because its their duty or other similar such fluff, well you're not going to find any of them hyping this small Canadian biotech I don't believe.
If you're a scientist who attends events like the prestigious and recent Gordon Research Conference on Lipoprotein Metabolism though you might have seen Dr. Noman Wong's presentation on the benefits of selective inhibition of Epigenetic BET Proteins in Cardiovascular disease. Dr. Wong was there in his capacity with the University of Calgary, but he's also Resverlogix's Chief Scientific Officer and Co-Founder.
Why didn't the company put out a PR on the presentation? I don't know, but I think those behind the short selling should be thankful. Especially after Resverlogix recently announced that they were no longer going ahead with that Proposed Share Offering that was PR'd on April 17th. To my way of thinking that makes a lot of sense given that the company just raised $30 million USD by way of a non-dilutive credit facility. With a burn rate of about $4 million CDN per month they should have more than enough money to get them to BETonMACE top line results expected in another 6 months, $30 million USD is about $40 million CDN.
I have written too much already here, but its the weekend. If you enjoyed this you're more than welcome to share. I think there's a button somewhere down below that provides that function.
Further Disclosure
I wrote this on my own, and it is an expression of my thoughts, views and opinions, it is not however investment advice, see the full disclaimer at the bottom of this blog. I am not an investment adviser but please realize that speculative stocks comport significant risk. While there is potential for rewards there is also a very real possibility of losses. I received nothing in compensation for the writing of this blog entry, its part of my OCD condition, writing is something I enjoy.
Cheers, comments welcomed.
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