Baker Bros buys nearly 50% of secondary offering from AQXP

Ok, a little backstory:

On 8/6/2015 AQXP announced in its earnings conference call that the drug that failed to meet its primary endpoint a couple months earlier actually met all of its secondary endpoints and showed strong promise for further development. Subsequently the stock shot up 500% from $1.74 to the high $10s, then gapped up another 90% the next morning and ran to nearly $56 in one of the most epic short squeezes I've personally seen on a listed security in the last 10-15 years.

On 8/10/2015 a schedule 13D was filed with the SEC disclosing that Baker Bros. Advisors, a hedge fund that invests heavily in the healthcare sector, purchased over 4.2m shares during the run on 8/7/15, at various prices between $3 and $11. http://ift.tt/1NuZepg This was significant because there were barely over 10m shares in the float, meaning the fund bought over 40% of the available shares.

Then, a few days ago AQXP announced they are pricing a secondary offering of 5.5m shares at $15.50/share, typical of biotech companies after a big announcement, since they can use the stock's momentum to raise lots of additional capital to fund the continued development of their drugs. This reduced Baker Bros position and also increased the float which would normally curb some of the volatility and even drag the price down as the market corrects for the dilution.

Now here comes the kicker: today just after 4pm Baker Bros. filed a form 4 with the SEC disclosing that they bought nearly 2.5m more shares of AQXP at $15.50 - nearly 50% of the secondary offering - only a couple days after it was announced: http://ift.tt/1VT1b01

On that news, AQXP ran roughly 30% in after hours to high $21s/low $22s.

The reason for this post is really just to give people a bit of backstory on what's going on with AQXP so they can understand what to expect if they're trading it. Personally I think Monday will bring some crazy action on it, especially since Baker Bros owns almost 50% of the float and in opening that position has given retail traders the "opportunity" to develop a 40% short interest. I say opportunity in quotes because with 40% of the shares held short and a big fund holding a big long position, the supply is really really low and that means anyone currently holding shares will basically be able to name their price, including Baker Bros if they chose to sell (though they probably are just speculating on the results of the next phase of drug development, even though it's an extremely aggressive and bullish bet).

In other words, methinks AQXP is going on a big run on Monday. I took a trade in it during after hours to build some profit cushion but am going into Monday with no position. If it gets some legs I'll definitely be long for the fun. If nothing else it will be fun to watch the chaos.

Feel free to discuss!

Submitted September 12, 2015 at 02:29AM by ghostofgbt http://ift.tt/1FDl2ah