Lithium Americas resumes up trend, handle forming....

I last wrote about Lithium Americas on May 6th, taking note of its inclusion in the only Lithium ETF that I'm aware of, the Global X Lithium ETF.  Previous to that I put up a post about the chart on April 27th, speculating that I thought the PPS could fall back to 65 cents if the cup and handle pattern I was seeing played out.  

• April 27th Blog Posting:  Cup and Handle Forming
• May 6th Blog Posting:     LAC added to Global X Lithium ETF

On April 27th the PPS closed at 79 cents and on May 6th the close was 70 cents.  The lowest its traded between April 27th 2016 and the present is 66 cents, so if this upward move continues I won't have been far off with my 65 cent pull back call.  On Friday May 20th, 2016 the PPS closed at 88 cents for a 33% climb of that recent 66 cent low.

Here's the chart:  

If this pattern does indeed continue in the manner I'm thinking it will, (no guarantees though) then we should be seeing a closing price above the recent 94 cent close of April 19th when the pull back started and signalled the potential for a handle forming.  If that happens, then I envision LAC breaking out to a new and higher trading range north of a dollar.

Not everyone is a fan of technical analysis, or TA for short...I know there are lots of fans when T&A stands for something else though :-) 

Some view charts and TA as little more than guessing, like horoscopes and palm reading.  Those who hold this view will typically say something like "when good news comes out stocks go up, when its bad stocks go down".  And to a degree there is merit in that point of view, because often it does work out that way,

The whole idea behind TA is that it may provide an indication of future direction.  We've all heard the old saw about "buy the rumor, sell the news".  For my own part I view all the currently available fundamental data as already being priced into a stock.  And I also consider it likely that before news comes out, or before a major announcement is made, that there may be some parties in the know trying to profit from it by establishing or adding to a position.  I view investors of this kind as being what is often called "the smart money crowd".

What I look at is price volume movements, where a stock climbs on volume heavier as compared to when the price pulls back.  For me a climb of 2 cents on volume of 10 million shares trading is more significant than a drop of 10 cents on volume of just 1 million.  

***One big qualification.  I consider TA to be most reliable when a company is putting out little or no news, and is not engaging in paid promotion.***  

One of the tools available to this smart money crowd, especially when its a stock trading for less than a dollar, is short selling.  I mentioned in an earlier posting the importance I place on keeping an eye on short selling:  Why Short Interest Matters

If I see 10, 20...30% of the issued shares shorted, that to me is a warning flag.  Bears are not stupid, and if there have been some large bets placed on a stock falling, then I take that as a potential omen, a sign that bad things may be coming in the future.

In the case of Lithium Americas the short interest is nothing approaching even 10%, in fact as of May 15th 2016 its less and one single percentage point, 0.54 % to be precise.  

However the raw number is notable, its just over 1.6 million.  Considering the daily average volumes LAC is trading lately, that's a drop in the bucket.  I think its very possible that there may be those looking to accumulate LAC, and that short selling may have been used to squelch the upward move in the PPS in an effort to inject some fear and uncertainty into retail holders.  You have probably heard it referred to as shaking the tree.

Friday May 20th saw a big jump in trading with over 11 million shares trading hands when all the secondary exchanges are included, (8.8 million on the main TSX).  That jump may have been caused by Lithium America's inclusion in a Bloomberg article about SQM which references the deal they struck with LAC for 50% of their Argentinian project.  BLOOMBERG ARTICLE

If you're looking for an active forum for LAC then your best bet is Stockhouse where I post with the name ledrog.  There's a lot of speculation about SQM potentially buying out LAC.  While such a deal would not surprise me, I don't know if there's anything to it beyond idle retail banter and/or hope.

A note on LAC and any stock that I write about.  Lithium Americas is a highly speculative investment, and it is not a suitable investment for everyone.  Verify all the information I have provided, I endeavor to ensure that everything I post is accurate, but I rely on outside sources for a lot of the information I provide here and I cannot warrant that everything is accurate, and also I could make a mistake.

If you have a comment, or if  you simply wish to point out something I may have gotten wrong...please do, the comment field is open.  All I ask is for a respectful tone and no profanity or advertising.  

Peace

Ziopharm - News long on hope, vague on data.....

The primary goal of most phase 1 clinical trials is to prove safety, basically to show that a drug, therapy or treatment doesn't cause severe adverse reactions and/or death.  With the news out of Ziopharm today (May 18th, 2016) it seems that goal is being met.  They reported that their on going phase I trial of Ad-RTS-hIL-12 with Veledimex for patients with Glioblastoma has enrolled 11 patients with only 1 death.  

http://ir.ziopharm.com/releasedetail.cfm?ReleaseID=971714

The company cites the median follow up as being 6.2 months, which compares well given that this form of aggressive brain cancer typically comes with a prognosis of death in as little as 3 or as many as 7 months, depending on what treatments have already been administered according to the release.

It sounds good, and it is.  This trial is, so far, meeting the primary goal of a phase 1 trial, its proving itself to be safe.  But the data is more than a little thin and leaves lots of questions.

The first and most obvious question relates to the median figure of 6.2 months.  Median, as anyone who's taken even a high school level course in statistics knows, represents the middle point.  Given that this trial data represents 11 patients, this median figure means that 6 patients have been in the trial for 6.2 months and longer, and 5 have been in less than 6.2 months.  

Is this important?  I think it is, definitely.  Of those 5 cases that have been in the trial less than 6.2 months...How long have they been enrolled?  Is it a few weeks, a few days?  The PR doesn't say.  

Why not include that data, let the world know what the shortest and longest number of months in the trial is?   Instead of just citing a median figure why not include more information so that shareholders and prospective investors can make a more informed decision.

Instead of just saying "Overall median follow-up for patients enrolled in the trial is 6.2 months with 10 of 11 still alive".  Why not add...."with the range being from 1 month to 11 months"?  Another significant point is the one death.  At what month did it occur?  Was it at 1 month, at 2....at 10?  

I can't help but question why more data wasn't included.  Its only 11 patients, why not give the time in for each?  It wouldn't be hard, I'm sure the data is readily at hand.  

Obviously there are only 6 patients who have been enrolled for 6.2 months or longer, that much is not in question.  But presenting data on just 6 patients might seem almost desperate.  Did they include patients only enrolled for a month or two to boost the number so that it would appear more meaningful and then only cite the median figure in an effort to spin the news?  In my opinion that is a very legitimate question.

If you go to clinicaltrials.gov you can read about this trial:

https://clinicaltrials.gov/ct2/show/NCT02026271

If you check that site you will see that the estimated enrollment is 48 patients.  So 11 is less than 25% of the estimated total, and the study start date is listed as June 2015.  If they did start in June 2015, then they've been dosing about 1 patient per month on average.  The estimated primary completion date is given as December of this year, that's for the primary outcome measure, safety.

That means they're going to have to start enrolling patients at a much faster pace if they want to have any deep and meaningful data by the end of the year.

The estimated date for completion of the full study is given as December 2018.  

This is notable because Ziopharm, as everyone already knows, only projects having enough cash to maybe last to the end of 2017, and they fully disclose that they will be in need of raising more capital.

That has me thinking that this PR with very little deep or meaningful data was perhaps pushed out in an effort to prop up a falling share price.  If another secondary is coming sometime next year, and I view that as a slam dunk, then the higher the PPS is, the less dilution that will be required.  And with all the share based compensation it certainly seems logical to me that the powers that be within the company would want to shore up the falling share price.

Thoughts anyone?  As I've disclosed previously I do own put contracts so my views are not without bias.  

The perils of taking on 'The Street'

I have no illusions about this blog's significance.  My little island in cyberspace is a tiny speck, a dot on the ocean that is the public markets. That's why you will frequently see me referring to Avoid The Bag as a meaningless and insignificant little blog, (or words to that effect) because that's what it is.

Do I have bigger aspirations for this space?  Yes and no.  I would be lying if I didn't admit to some delusions of grandeur.  Of being a beacon of market wisdom and reasonable commentary, with a large following.  But I also know the dangers that would come were that ever to come to fruition, which I highly doubt will happen in any case.  

If you read the disclaimer at the bottom of this site you will see right up front something that, to me, is very important.  I have not and I will not accept any payment or compensation of any kind to write anything about any stock, either bullish or bearish.  With that being said, I do eat my own cooking, and when I'm bullish on a stock I will take out a position.  And if I'm bearish and thinking a stock is overpriced and due for a correction, I will try to profit from that as well....that's how the market functions.

But I also know that for a market to function you need two things, buyers and sellers.  Yes, I know that is obvious, but I believe it merits repeating.  

The Bath Tub 

The best analogy I have ever heard involves representing the market as a bath tub.  Let's say there is a stock that we will call ABC, and its trading for $1.  The tub will represent the market for ABC and the water level will be the share price.  At $1 we will say there is one inch of water in the tub.  Water added to the tub is the buying that occurs, selling conversely is represented by the drain.  So long as there is a reasonable balance between buying and selling, then the water level or price per share will remain about the same, the water being added equaling the water going out.

For the sake of this example we will say that ABC is a speculative stock, that the company represented is currently losing money.  We will also assume that the company has sought out a big name partner, and that if the deal is finalized the news of this partnership is reasonably expected to create a lot of excitement and buy side interest in the stock.

Although it is illegal I for one am convinced that when deals and partnerships are being negotiated and other significant developments are in the works, that there are obviously individuals in the know. And while trading on insider information is counter to the rules, I have little doubt in my own mind that there are individuals who seek to profit regardless, not directly certainly...but maybe by proxy.

Back to the bathtub.  Those who have perhaps caught wind of the big partnership plans could reasonably be expected to want in, to establish a position by going long on ABC.  Now, they could just storm in and start buying, causing the water level of the tub to rise.  The danger there is that the rising water level might cause the drain to plug, as those inclined to sell hold on tighter to their shares because of the rising price.  And other players may see the water level rising and start competing for the available shares, driving up the price and defeating the idea of buying low.  

A better method might be to borrow some shares and sell them, going short in other words.  This has the effect of taking a pitcher and scooping water out of the tub, causing the water level and hence the PPS to drop.  This brings on fear in shareholders and may induce them to sell while the PPS is low.  

And so it goes, ABC's water level stays around $1 as those anticipating the big deal load up.  As the deal gets closer those who have been loading up stop scooping water out, they cover off any outstanding short positions and start driving the PPS higher.  This often brings on the attention I just mentioned, other players see ABC's bathtub rising so they want in too.  The tub rises higher and higher, from one inch to two, and then three and then five.  ABC once worth $1 is now trading at $5.

Then the news hits, ABC has just finalized a major partnership deal with a leader in their business space.  New releases are issued, social media catches fire and ABC is being talked about in stock forums all over the Internet as buyers storm in.  Maybe the deal is announced on CNBC or other similar media outlets.

Now the tub really starts rising, in a few short days or weeks the level of water goes from five inches to ten. But don't forget the drain.  If people are buying then others must be selling.  As the tub gets up around twelve inches or $12, the water stops rising.  The volume of water pouring into the tub is still high, but an equal amount of water is going down the drain as those who got in early and cheap start leaving. 

And if the deal doesn't bring in any added revenue, if ABC is a company that issues shares to finance its business, then those who jumped into the tub with exuberance and excitement may find themselves trying to keep themselves clean with an ever diminishing supply of dirty water.  

A good analogy but not perfect

I like the bathtub analogy, but it does have its flaws.  Often there are shares that weren't bought when the PPS was at $1.  There are option grants and warrants and shares that may have been used as payment for good and/or services.  But overall this example provides an excellent general overview of how the market functions.  And I think it is most useful when considering companies that are speculative in nature, with companies that are not yet profitable and perhaps never will be.

So whats' the point

The point of this posting is in the subject line:  The perils of taking on 'The Street'.  When I reference 'The Street' I am using it as a euphemism for industry players, or market hacks as I like to call them. I am not talking about the website or news service of that name.

The stock market is a zero sum game, every trade involves a buyer and a seller, one gets shares and the other gets money.  The 'smart money' players who buy low and sell high, they need others doing the opposite, selling low and buying high.  And this latter group is invariably dominated by retail investors, the target audience of this pathetic and insignificant little blog.

I get attacked almost daily in social media for my opinions.  especially when I refuse to drink the Kool-Ade about some speculative money losing company's forward looking promise when its trading at or near its highs.   No worries, I get it.  

'The Street' is far more powerful than any little ol' Joe Retail blogger, I know that.  If this blog and my opinions were to ever get too popular, then the market would have to slap it down....and with the money that industry players have at their disposal it would be an easy thing to do.

Good luck in the markets retail players, its a shark tank...so pay attention to those sharks, they usually try to disguise themselves as playful friendly dolphins.

Ziopharm - No short squeeze and no buyout

I have been accused of being obsessed with Ziopharm, and there is certainly some merit to that opinion.  I have a passion for the stock market in general, and right now Ziopharm is an ongoing fixation that's lasted a little over a year.  

Before ZIOP those who follow me on stocktwits' (where I post as growacet) will remember that it was MOBI that occupied my bearish attention, being a stock I viewed as a hyped up pump job.  

Both MOBI and Ziopharm came onto my radar the same way, from an email blasting chop shop. This outfit has hyped a number of stocks, LEJU, SBOT and CLDN spring immediately to mind on top of the aforementioned MOBI and ZIOP.  

Touted as investments, citing forward looking promise....but you can check the charts to see how well they did as long term holds.  CLDN was pumped by this shop in early 2015, but don't look for it now, it doesn't exist.  After a 1:15 reverse split it merged with a company called Eiger Biopharmaceuticals.  

Puke, frankly this type of promotion turns my stomach.  

I had a friend named Dave.  I use the past tense because Dave (not his real name) isn't around anymore, not for his wife, not for his two daughters.  I'll never know the precise reasons Dave decided to take his leave, but I'm pretty sure I know why.  He played the market, and was just the type of guy that email blasting chop shops rope in.  He had a good job with a good salary, but dreamed of winning the market game and getting rich beyond his wildest dreams.

People can and do get hurt playing the stock market, gambling with money they can't afford to lose. And these promotional outfits couldn't give a rat's rosy rear end.  To quote Gordon Gekko:  ''Greed is good''.  So long as these slime make money, they don't care.  

I want to make one point very clear here, the shop I'm referring to is one of the best in my experience, and that's what makes them dangerous for newbie and unseasoned investors and/or traders.  What do I mean by good?  

What I mean is the stocks they tout often make very quick and sizable gains after they start pumping them.  Here's the chart for LEJU which stockreversals (hell I might as well include their name) started pumping shortly after it started trading.  In August of 2014, they recommended it at $12 to their email sucke...errr, subscribers.

That's pretty typical for the stocks this outfit hypes.  After touting it at $12 it quickly climbed up around $18.  Then over the ensuing months it crashed hard, falling all the way as low as $3 and change, today its worth somewhere around $5.

Someone who bought 10,000 shares at $12 would have been in for $120,000 and now they'd be getting somewhere around $50,000....a $70,000 loss.  And don't think those kind of losses don't happen.  

Of course they've long since moved on from promoting LEJU, and ZIOP for that matter.  

Their latest ''hot stock'' is KTOV', another relatively new issue like LEJU was.  Does the climb look familiar?

Can I say with certainty that KTOV will follow the same pattern that LEJU, ZIOP, CLDN, SBOT and all the others did?  Nope, I can't.....but I would not bet against it either.  I have no doubt that those promoting KTOV will say, ''this one is different'', it always is.

Now, again....let me be clear.  I know that apologists for stockreversals and other promotional outfits of this ilk will say, and rightfully so, that these stocks all did make gains from the prices at which they were profiled.  

In so far as I am able to verify that information, it is a true claim.

But I also understand the mentality of retail investors, as do promoters.  Retail investors have a bad habit of actually becoming attached to their stocks, of reading every news item and opinion piece that comes out.  Its not long before the average retail investor believes the forward looking promises. Especially with speculative companies with a history of burning through cash and diluting.

The professionals and the chop shop boys know this, they know how retailers think, and they profit from it.  I used to work as a financial consultant, and I know all too well that average investors, investing in individual stocks, that they overload and don't have proper diversification.  

Retail investors end up being the fulcrum around which the professionals make bank, alternately pumping and dumping, and then shorting and distorting.  Joe Retail (my chosen sobriquet here) wants to find quality stocks that he can buy and hold, ones that will deliver long term value.  Some volatility is to be expected of course, but not the kind that leads to charts like the one above for LEJU and all the others if you want to check them out.

So what happens?  Whether its MOBI two years ago, or LEJU or ZIOP, retail investors are left holding the bag, unable or unwilling to take a loss.  They become convinced they've been scammed. Not by the jokers who sent out the emails, but by dark market forces determined to hold their stock down.  

That's what's happening with ZIOP right now in my opinion.  Many shareholders are unwilling to acknowledge even the remote possibility that they were roped in by promotional hype.  And if they go to social media, places like InvestorVillage for example, they find others telling them what a wise choice they made.  Even if their shares are now worth half of what they paid for them.

Everyone can read the filings.  Ziopharm has not misrepresented anything.  They have nothing in late stage development.  And they're projecting that they won't have enough cash to get them beyond 2017.  Ziopharm's 10Q and 10K filings are very clear in saying that they're going to be in need of raising yet more money.  And they allow that their current resources may not even last til the end of 2017, that expenses could increase meaning they would run out even sooner.  The risks are fully disclosed.  

The quarterly and annual filings use terms like expectation, and words like may and could.  But expectations are often not met, and what ''may be'' and what ''could be'' can also be expressed with equal accuracy by saying ''may not be'' and ''could not be''.

The hope that many ZIOP shareholders seem to be clinging to now is that of either a buyout or a short squeeze.  Or both.

Again, this is only opinion because we're talking about the future here....but to use the vernacular of my youth growing up in NYC and NJ, ''FUGHEDDABODIT''!!!.

Firstly on the buyout side.  Yes, RJ Kirk has orchestrated some blockbuster deals in this space.  He did an incredible job in selling both Scios and New River to big pharma companies .  But Scios and New River had drugs that were either approved or in late stage development.  Ziopharm by contrast is probably 5+ years away from even being close to anything, and as noted before they don't have enough Do Re Mi to last that long.

On top of that the buyers of Scios and New River....they definitely got the raw end of the deal in my opinion.. Johnson and Johnson has had to take write downs for Nacretor, the drug developed by Scios.  I could be wrong, but the old adage....''fool me once'' springs immediately to mind.  

Maybe RJ can convince someone to buy Ziopharm, but I can't see why they'd pay anything even close to the current MC of $900 odd million for a cash burning company with nothing in late stage development.  

Finally there's the case of short interest, which for Ziopharm sits at about 30% of the float as of the most recent update to April 29th 2016 according to WSJ.com.  This is nothing new for Ziopharm of course, the short interest has been high for a long time.  

Shorts didn't rush to cover the 35 odd million they were short in November 2015 when the price was pushing up near $15.  Why they'd all of a sudden be forced into covering at less than half that price now is beyond my ability to comprehend.  I think those touting a pending short squeeze, that they're either naive novice investors, or industry hacks trying to keep the retail monkeys holding their bags.

Full disclosure, I like to have some skin in the game about the stocks I write about...and with ZIOP I do own put contracts.  All the other stocks previously mentioned in this posting though, I have no position long or short in any of them and no futures contracts.  

I'm going to close this off, but I want to write about one last thing, my faith.  I am Christian, and as most people will be aware, a central tenet of the Christian faith is to 'do unto others....'.  I don't want to overstate this, I'm not one of those guys you are going to see standing on a street corner trying to get people to accept Jesus as their personal Lord and Savior, I'm not an evangelical nor a fundamentalist.  But I do have a strong faith in the teachings of Jesus of the Bible, in particular those which appear in more than just one Gospel.

Writing this blog is somewhat cathartic for me, and it helps me sort out my own thinking.  And one thing I know is that I might just have a log in my own eye while I rant about the sliver in the eyes of email blasting chop shops.  I've written about some companies that I believe have good prospects for price appreciation, but I have not fallen in love with them and if they make big gains I fully intend to dump them.

EGT.V certainly falls into that category.  And LAC.TO is another that I'm watching closely for irrational exuberance.  So far the only stock I've written about that I genuinely believe has excellent prospects as a buy, hold and prosper investment is HMPR for the reasons enumerated in my posting on that company.  I'll be writing about another soon, Extendicare a dividend paying retirement-nursing home.

Peace.

Ziopharm - The Wall Street Sting

Have you seen ''The Sting''?

Its a movie from 1973 about con-artists in the 1930s starring Robert Redford and Paul Newman, among many other notable actors including Robert Earl Jones, the father of James Earl Jones.

Here's the Cliff Notes version, or Coles Notes for Canadians like me :-)

Two small time hustlers, Hooker played by Robert Redford and Luther played by Robert Earl Jones, pull a con on a guy charged with delivering money from an illegal gambling outfit.  They play out a little scheme  and succeed in switching his envelope filled with about $10,000 for another stuffed with tissue paper.  They score big.  The only problem is that the 'bag man' they hustled was a runner for one of the biggest crime bosses in the city, Doyle Lonnegan, an Irish mobster.

Lonnegan has Luther killed and has a contract put out on Redford's character Hooker.  Wanting revenge on the big crime boss Lonnegan, Hooker seeks out legendary con-artist Henry Gondorf, played by Paul Newman, who is also a friend of the now deceased Luther.  They concoct an elaborate scam to swindle Doyle Lonnegan out of $500,000.

But here is the central point.  Newman's character Gondorf explains to Hooker that the con has to be played all the way through.  After they've taken Lonnegan's cash the old Irishman still can't know he was swindled.  Its a great movie and here's a spoiler, they succeed.  But knowing that won't ruin the movie, its all about how its done.

What does this have to do with Ziopharm you ask?

Allow me to explain.  But please note, this runs deeper than Ziopharm, this is just the way the big Wall Street type players operate a lot of the time, especially when it comes to speculative money burning companies.

The Company

Let's go back in time, all the way to 2014.  Ziopharm closes out the year with a closing price of $5.07 on December 31st 2014, which is actually a big improvement over where it was a few months earlier in October when shares could have been had for just $2 and change.

All the way back in 2011 Ziopharm entered into a channel partner agreement with Intrexon, not that it ever had much affect on the share price.  Between January 2011 when the agreement was signed and the end of 2014 ZIOP's share price never once touched even a mere $8.

As 2014 closed out the 10K filing for that year reveals Ziopharm was down to about $42 million in cash and equivalents, with cumulative net losses totaling over $370 million to that point in its history. This amount may seem large, but take note of the fact that this company has been around since 1998 when it was incorporated under the name Net Escapes Inc. which was later changed to Easy Web in 1999.  Ziopharm was born in 2005 via a ''reverse acquisition'' of Ziopharm Inc.

Shares issued up to December 31st 2014 were a little over 104.4 million, with the company authorized to issue as many as 250 million in total.  Basic and diluted net losses per share for the year ended 2014 came it at (-$0.31).  The line item for stockholders equity shows $33.8 million, or about 33 cents per share.  In terms of a clinical pipeline, at the end of 2014 it appears there was nothing undergoing any clinical trials, just plans  for 2015.

So let's sum up.  at the end of 2014 Ziopharm was a company that:

• Started out as an outfit called Net Escapes then later changed it name to Easy Web.
• Had over 100 million shares issued and outstanding
• Net losses for the year came in at over $31.7 million
• The accumulated deficit at the end of 2014 was approximately $372 million
• Had no current trials developing any drugs or therapies.
• Their only late stage (ph-III) trial had failed in 2013 for palifosfamide.

I've seen OTC penny stocks that looked better strictly from a fundamental and financial perspective. If you want to verify any of the information I've just provided you can read Ziopharms 10K filing for the year 2014, in fact I encourage it:

http://secfilings.nasdaq.com/filingFrameset.asp?FilingID=10519440&RcvdDate=2/26/2015&CoName=ZIOPHARM%20ONCOLOGY%20INC&FormType=10-K&View=html

So how did a company with this type of history go on such a wild ride, climbing from less that $3 in October of 2014 to highs of near $15 in 2015?  And how did the company raise the money needed to continue operating?

Wall Street to the rescue!!!

Enter J.P. Mogan Securities LLC as the lead underwriter for a secondary offering of 10,000,000 shares priced at $8.75 for the public in February of 2015.  In fact they over subscribed, taking an additional 1,500,000 shares under the same price conditions.  $8.75 as noted was the price to the public, the underwriters paid $8.225 per.  That filled Ziopharm's cash register to the tune of about $90 million after discounts and expenses.  

Thanks to the cash infusion Ziopharm was now well capitalized, and they projected their resources might be enough to finance the company into the fourth quarter of next year.  After that their filings say they will require further financing.

But how could the underwriters get the public excited enough to pay $8.75 or more for the 

secondary offering?

J.P. Morgan Securities LLC was the sole book running manager for the offering, and BMO Capital Markets acted as the senior lead manager.  Then there was Griffin Securities, Maxim Group and Mizuho Securities U.S.A. all of whom acted as co-managers for the offering.

That's quite a team, with analysts to provide coverage and clients numbering likely in the hundreds of thousands.  Still though it probably would have been a tough sell, a biotech/pharma company with nothing in late stage development and burning through cash with over 100,000,000 shares issued at the end of 2014 and more on the way.

But by the time those 11,500,000 shares started trading big news had already been announced.

The MD Anderson feeding frenzy

Thanks to an agreement with the MD Anderson Cancer Center,  Ziopharm made a big splash in the hot CAR-T space. Companies like Juno and Kite had already seen explosive growth in their share prices thanks in major part to their CAR-T initiatives, and now Ziopharm was set to join the  party.

Of course the partnership with Anderson didn't come cheap, Ziopharm and Intrexon ponied up $100 million large for the deal, split evenly between the two.  Thankfully MD Anderson took payment from both in shares, because let's face it, the way Ziopharm burns through cash they didn't have a lot left over.

Even better, JP Morgan was hosting their 33rd annual Health Care Conference in January of 2015. What better place to announce the MD Anderson news?  Apparently MD Anderson was a willing partner, and was okay with accelerating the agreement to accommodate Ziopharm and Intrexon, but not for free.  It required an additional payment of $15 million split equally between the two companies, all in shares again of course.

What was the effect of announcing the Anderson deal at the JP Morgan Healthcare conference?  You be the judge, on the day Ziopharm's CEO made his presentation over 38.7 million shares of ZIOP traded hands with the price closing at $8.87 after closing at just $5.74 the previous day for a one day gain of 55%.

And that was just the start, Wall Street was just getting warmed up.  After all, the secondary offering which JP Morgan was leading was slated for February.  But now they had a compelling story. Ziopharm had just been "chosen" by the most prestigious cancer centers in the United States, and maybe even in the world.  This was a story that needed an audience, and with some major players in the financial markets on board you know the story was going to be told.

Enter the analysts

Remember the firms involved in the public offering of an eventual 11,500,000 shares?

JP Morgan's Cory Kasimov rated the stock as neutral following his firm's Healthcare Conference and did not provide a price target.  Other companies working the secondary offering however were far more bullish.

• BMO came out with an outperform rating and a price target of $15 after the conference saying that the Rheo Switch technology "could" be a game changer.  
• Griffin rated ZIOP a buy and put a price target of $12 on the stock, which was later raised to $21 in March.

Bring on the promoters

It wasn't long before ZIOP became the darling of social media.  Interest exploded with the Ziopharm thread on InvestorVillage becoming the most active forum led by some guy with the user name RobCos assuming the role of chief cheer leader.  On Stocktwits thousands of user IDs put Ziopharm on their watch lists.  

Anonymous emailing shops like stockreversals started hyping Ziopharm to their book. Some outfit called "Medical Technology Stock Letter" through its website Bioinvest included Ziopharm in its reccomended portfolio and alerted its email subscribers.  

The games had begun and ZIOP's share price did what would be expected, it soared, taking three or four runs at the $15 mark in 2015 but never able to break through that barrier.

And now?  As of this past Friday May 13th 2016 the PPS closed at just $7.25, even less than where it was following all the excitement of early 2015.

So what happens now?

Many of those investors who bought into the hype and excitement are likely hunkering down, convinced in the long term potential for Ziopharm to develop a cancer treatment or cure.  According to the projected timelines included in Ziopharms own SEC filings clinical trials take between 1 and 2 years for phase I, between 2 and 3 years for phase II and between 2 and 4 years for phase III.

Given the early stage that Ziopharm is at shareholders are looking at between 5 and 9 years from start to finish before the company projects that a drug approval "could" be obtained.  I use the word could because Ziopharm could fail again like they did 2013 with palifosfamide.  And the company anticipates having only enough cash to get them into late 2017, next year.

After the secondary share offering in 2015 the investment machine went to work, analyst targets of up to $21 per share, email blasts, social media types all over twitter, stocktwits, yahoo and other sites. All that activity brought in a lot of buyers obviously.  But is there any incentive now to bring in a huge level of buying interest?

I'm sure there are individuals posting in social media who believe they can spur interest in the company, but realistically nothing can compare to the hurricane winds that come from a stock that has the big boys of Wall Street working their magic.

Maybe sometime next year though, when Ziopharm is again running low on cash, maybe then another tsunami of promotion will come to bear and push the PPS higher.  Until that time I see the PPS drifting.  Ziopharm has a huge following and I have no doubt that there are Hedge Fund types pushing it around, pumping it up and dumping then shorting and distorting, that's their game.

Perhaps they could make their existing cash last a bit longer with some austerity measures.  It certainly had to by eye popping when American Business Journals came out with the story that Ziopharms CEO earned more money in 2015 than the CEOs of major pharma companies like Novartis and Roche.  (STORY HERE)

In the meantime retail buy and hold longs will be told..."Ahh well, that's the market, you can't win them all".  Retailers are the marks, and nobody is gonna yell GOTCHA when the bag closes.  After all, this is nothing new....and  the machine that is "The Street" will want them coming back for the next big show and investing more money.  

If its shares of Ziopharm that are being sold again the story will have to be even better than it was at the start of 2015 in my opinion.  Now its a company with an accumulated deficit of over half a billion dollars, billion with a B.  And instead of a 104 million odd shares there are now over 130 million.

The comment field, as always, is open.  But no profanity or attacks will be tolerated, keep it mature.

Full disclosure, I own ZIOP put contracts so my opinions and views are not without bias.

Life lessons from the stereo store

After I finished high school I decided to take a break from the world of academia before going on to University.  I ended up taking a job in a stereo store as a salesperson.  If you're wondering how far back this was, well the place sold quite a few items that hardly exist now.  Stereo receivers, amplifiers, tape decks and turntables were some of the products, along with televisions and a relatively new invention called the microwave oven.

One day while I was still relatively new a young couple walked in, they were right around my age, maybe 17 or 18.  They had just moved in together and were looking to buy a TV Set.  There was one problem, they didn't have any money, and were attracted to the store I worked at by a sign that promised easy financing.  

After settling on a TV that cost two or three hundred dollars I had them fill out a credit application with one of those lending institutions that specialized in that type of loan.  A short phone call later and they were approved.  They would be paying something like $15 or $20 per month for the next two or three years.  

All seemed well and good, a sale....hot dog.  

Then my manager Winston stepped in and asked me:  "How much are they good for"?  I didn't know what he meant, so he took me back to the phone and said:  "Watch".  He proceeded to call the financing company and found out that they were approved for up to $500 or thereabouts.  The next thing he said was:  "Watch this".

Winston walked over and grabbed a random VCR costing somewhere around $200.  He walked up to the couple and said: "Look what I'm gonna do for you".  He explained that for just $10 more per month they could have both the TV and a VCR.  

The guy lit up like a Christmas tree, probably envisioning watching XXX videos with his girlfriend. But as is so often the case, his girlfriend looked worried.  She asked Winston if they could talk to me. My manager retired behind the counter and the young couple and I went into a corner of the store. She was worried, I had explained to her that the interest rate was high, but that it was a small purchase that would help establish a good credit rating.  That was when it was just a TV.  

Sensing her concern I advised them to buy the TV, and to stick a a few bucks aside each month and then to come back in a few months and pay cash for the VCR.  

Winston took it all right, I explained to him that with rent, gas for the car, insurance, phone and all the other expenses that come with independent living, that the girlfriend was worried about them overextending themselves, and she had good reason to be concerned.

Marketing and sales people love to break things down to a low monthly payment, some will break it down to "just pennies a day".  But those small monthly expenses add up, $5 here, $25 there, an extra $10 for this and another $30 for that, before you know it you're spending and additional $200 or more per month and putting nothing aside for savings.  

What's the point of this little bit of personal history?  None really....its just life experience.  But whether its TVs and VCR, or stocks and other financial instruments....most sales and marketing people only care about the sale and the commission that goes with it.

Peace :-)

Hampton Roads Bankshares (HMPR) A great play for retail investors?

All stocks are speculative in nature.   Whether its a penny stock with 100,000,000 or more shares issued and an accumulated deficit in the hundreds of millions, or a profitable dividend paying company included on a major index. 

Speculation centers around the share price.  Just because a company has never achieved positive earnings doesn't mean its share price can't soar.  And likewise just because a company has a history of profitable operations and perhaps even pays dividends, that doesn't mean that its PPS can't fall. 

For my own part I view speculation as being a matter of degree.  A company with actual profits I view as being less speculative than a company that is currently losing money.   But from my experience its typically companies that have the worst histories in terms of bottom line performance that experience the biggest gains.  However those gains often evaporate within a very short period of time, often in just a few weeks or a couple months, and sometimes in mere days.

The difficulties for retail investors are numerous when dealing with highly speculative stocks.  The volatility can be both exhilarating and devastating, with retailers almost feeling the need to babysit their investment, watching it in real time every trading day.  That kind of attention isn't easy, even in our hyper-connected world.  And it plays on people's emotions in classic market fashion, alternately triggering greed and fear.

Let's say its a penny stock that was bought at 10 cents that goes up to $1.00 for an eye popping 1,000% gain.  Imagine you bought 50,000 shares at a dime for total investment of $5,000 + brokerage fees.  The stock goes to a buck meaning that $5,000 has turned into $50,000....But what if you're in a meeting, or at an appointment when it hits that dollar mark.  And what if instead of closing at $1.00 it finishes at 85 cents for the trading day.  You still have an awesome gain if you sell for 85 cents, but instead of getting $50,000 for your shares you have to be willing to "settle" for a mere $42,500.  

Now let me be clear here, turning $5,000 into $42,500 is awesome, but $42,500 isn't $50,000....and its greed that so often nabs retailers and leaves them holding the bag, even when its overflowing with profits.  

Which brings me to Hampton Roads Bankshares, HMPR.  Yes I know my musings have a lot of preamble, but that's a function of my age.  I'm a long winded old bastid...un vieux schnook comme on dit en français.  

If you've been tracking this nearly invisible and pathetic little blog, or if you followed me over at SeekingAlpha then you should know my style.  I'm not about to start pounding the table screaming buy Buy BUY with lots of hyperbole about "OUT SIZED GROWTH POTENTIAL" or any of that other crap, because that's exactly what it is....CRAP.

HMPR represents a speculative investment for me, but comparatively speaking I consider it much less risky than many companies out there because it has positive earnings.  

If you're looking for a stock with a big following with millions of shares trading each day, then you're not gonna like HMPR.  On stocktwits where I post as growacet you won't find thousands of users following HMPR like some cash burning speculative biotech.  There are only 70 or so IDs watching it. If you check the Yahoo Message boards for pumping and bashing, you'll see me...krill66 offering up an opinion every now and again, and one other user telling me I'm an idiot and that HMPR is a waste of time.  

As far as I'm aware there are no email blasting chop shops hyping it, or any stock promotion IR firms working to attract investors.  But that shouldn't come as a surprise.  When a company is losing money and is using its shares as capital to keep the lights on and pay salaries, then engaging in promotion makes a lot of sense.  A company like HMPR that has + earnings doesn't need to play those games.

Besides, as per Nasdaq's Site almost 65% of the outstanding shares are held by institutions.  

Those who read my most recent blog posting, Why short interest matters - The danger of betting against Dah Bears, will probably want to know the degree of short interest.  As per WSJ its not much, just 2.16 million or less than 3% of the outstanding, that number is current up to April 29th 2016.   

A note of caution though about the low short interest.  With 3 month average volume of just 120K or so per day, it doesn't take a lot of volume to push HMPR around.  The public float here is only about 77 million shares, and if a big player is looking to inject a little fear into retail longs, then raiding 1,000,000 shares and selling them short could have a big negative impact on the PPS.  I don't think the chances of that happening are big, but I do think its possible.

As regular readers know (all 3 of you) I'm not big on fundamentals, viewing it as old data which is already priced into the stock.  While past performance does provide a guideline its no guarantee about the future.  As I noted HMPR is earnings positive with a significant number of shares in the hands of institutions.  

What do shareholders have to look forward to going forward?  

There's a pending merger with another Virginia based bank, Xenith Bankshares, that was announced this past February. (NEWS STORY HERE).  Of course that news is months old and constitutes part of the fundamental picture, so I assume it to be already priced in.

In my opinion the greatest potential for HMPR rests with the possibility of a return to paying dividends.  HMPR used to pay a quarterly dividend, but that ended in 2009 in the wake of the Great Financial Crisis.  From the GFC forward HMPR entered survival mode, suspending dividend payments and effecting a reverse split.  

Even without a dividend HMPR offers great risk vs reward potential to these eyes.  After years of rate cutting we have finally entered a period of climbing interest rates in my opinion, and I consider the banking/financial sector to have excellent prospects for growth going forward.  Interest rates have been so low for so long that many US regional banks like Hampton Roads had to struggle to survive, and many didn't.  

In my opinion HMPR has emerged from that cloudy period with the return to positive earnings and the lifting of regulatory restrictions which prevented them from paying shareholders in the form of dividend distributions.  There is no assurance that they will once again start with distributions, but with the restriction removed its at least possible now.  

I will end this blog posting with the chart.  I consider a long flat base to be an excellent indicator, and in my opinion the longer the base the better in terms of the potential for an eventual breakout.  This is a 5 year chart showing a 3+ year base pattern.  If it does play out and does break out from this base pattern it might not be for a while, but in the interim I don't think HMPR will see any wild swings downward.

As always take note of the disclaimer at the bottom.  I have been holding and buying HMPR for almost 3 years now so my opinions are extremely biased.  I eat my own cooking in other words, and sometimes I cook up masterpieces while other times I burn the food to a crisp.  Here's hoping HMPR is a slow cooked succulent delight.