Why I am short KBIO (KaloBios Pharma)

If you are even an amateur trader, you might have heard about KBIO stock back in September where it went from 2.08 to over $5 in 2 days and then back to 1.8s within days…

Now the funny thing is On Saturday 14th November (3 days ago)  Kalabios announced that it would liquidate its assets as it could no longer continue operations with the current cash on hand. In addition, the company stated that they would not be able to obtain the proper funding in the amount of time allotted, to continue with other drugs in the pipeline. The whole downward spiral started with two different trials failed to produce meaningful results.

Also for those who will remember, back in 2014 Kalabios had announced that its Asthma drug, KB003, had failed a phase 2 study. That was a bad setback, but things got worse the next year when the company announced that its phase 2 drug in patients with Cystic Fibrosis had also failed. Both of these failures really hit the company hard but it seemed like it was going to recover with enough pump until this new liquidation announcement.

In short, the lack of money really took this down, as the company chose to liquidate instead of attempt to find funding for the company. Did theytake the easy way out? That’s hard to say for sure, but one thing for sure is that investors have been left holding the bag. The company in charge of this liquidation effort is known as The Brenner Group. They will start the process immidately.

Since the announcement, we are seeing almost a comical move on the stock. Instead of crashing it is actually going up. This is mainly due to pumpers setup a good sub 1 to over 1 play in the last two days and used SSR (short sale restriction)  to their advantage.

What do I expect from this stock? Yes you know it. Back to under $1 in a few sessions or maybe sooner. Started my ss position today and happy to add more if it keeps poping higher. Fundamentals always win at the end.

Have a nice evening.

MT

Update: Since the post KBIO went back to 1.70s level (from 2.40s and I did not cover waiting for lowers) and today AH it went from 2 to cirrently 18s! The news that Martin Shkreli buying shares started a short squeeze wave. I managed to escape with just over -$50K but not to worried because of my AVXL win of nearly 4 times that amount in the previous week. This teaches us NEVER to say NEVER in trading. Anything is possible, anytime!

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