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Lazy, couple gin and tonics in write up that I meant to post last week...

 

This is a cigar butt short.

 

Company was toast and then COVID came along and "oh shit, we got a lab company", lets keep the gig going!

 

History of nefarious dealings. Massively promotional majority shareholder. Ties to frauds, shitty bucket shops, stock promoters, and mafia entities. Oh yea, SEC investigations too.

 

This company is literally a billion dollar penny stock. It exists for zero purpose but to serve Phil Frost and enrich his entourage. It has existed for over a decade and never made a legitimate profit. The "business" consists of rolling up failed pink sheeters, and ruined biotech companies, the majority of which Frost or his buddies have major(often undisclosed) stakes in, and then claiming the brilliant Phil Frost will reinvent or fix them and turn them into multi billion dollar products.

 

Company is burning north of $200M per year and even after taking NJ state loans will NEED to raise cash in the next 3-6 months.

 

Capital structure is dogshit. Convertible note issues with strike of $4 and chance. Frost owns a massive stake and keeps adding to promote the "insider buying" narrative. But he's old and a free call option is if he or his estate has to sell its game over.

 

Either way, this is toast and was "trading" at $1.30 pre COVID, was probably "worth" $0.15 (to) -$0.35(yes, negative) then, and now has milked stock promotion from the NIA and ridden the COVID crisis to skating by a little longer.

 

My 12 month price target is lower than the change you can find on the NYC subway(yes, while they are shut down and people are staying home). The company will likely be delisted and trade OTC. In a miracle scenario this occurs in a couple years. Realistically, much sooner.

 

Disclosure: I am short OPK. This is all my opinion but based of things you can look up easily.

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Lazy, couple gin and tonics in write up that I meant to post last week...

 

This is a cigar butt short.

 

Company was toast and then COVID came along and "oh shit, we got a lab company", lets keep the gig going!

 

History of nefarious dealings. Massively promotional majority shareholder. Ties to frauds, shitty bucket shops, stock promoters, and mafia entities. Oh yea, SEC investigations too.

 

This company is literally a billion dollar penny stock. It exists for zero purpose but to serve Phil Frost and enrich his entourage. It has existed for over a decade and never made a legitimate profit. The "business" consists of rolling up failed pink sheeters, and ruined biotech companies, the majority of which Frost or his buddies have major(often undisclosed) stakes in, and then claiming the brilliant Phil Frost will reinvent or fix them and turn them into multi billion dollar products.

 

Company is burning north of $200M per year and even after taking NJ state loans will NEED to raise cash in the next 3-6 months.

 

Capital structure is dogshit. Convertible note issues with strike of $4 and chance. Frost owns a massive stake and keeps adding to promote the "insider buying" narrative. But he's old and a free call option is if he or his estate has to sell its game over.

 

Either way, this is toast and was "trading" at $1.30 pre COVID, was probably "worth" $0.15 (to) -$0.35(yes, negative) then, and now has milked stock promotion from the NIA and ridden the COVID crisis to skating by a little longer.

 

My 12 month price target is lower than the change you can find on the NYC subway(yes, while they are shut down and people are staying home). The company will likely be delisted and trade OTC. In a miracle scenario this occurs in a couple years. Realistically, much sooner.

 

Disclosure: I am short OPK. This is all my opinion but based of things you can look up easily.

 

How are you shorting it? I've had this one on my radar and looking to either buy a calendar spread outright or (as an opportunity today presents) buy Jan 22, 2 put today and then sell Jan 21 2 put when this goes under today. My rationale for the calendar is that this thing managed to survive this long and will probably have access to some sort of funding until we make more headway on COVID treatment or vaccine.

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I'm outright short. Borrow is basically nil. Going into catalysts I'll sometimes waste money for piece of mind with a few OTM calls to hedge parts of the position, but at the end of the day, any pop is a gift with this turd. They have what I'd peg as less than a quarter of cash so they urgently need to do a capital raise. Last capital raise was announced at $2.20 or so and priced at $1.50.... I'd gander there may be a few more suckers right now given the promotion of the lab biz, but as we've seen with the hospitals, the economics of much of this corona related business activity arent great. They currently lose like $1.30 for every $1 in revenue, and their much hyped junk like Rayaldee and 4K score will likely continue to be adversely effected on a demand basis due to the virus. So.... lab testing dollars at low margin vs high margin drugs? I'll take that trade

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Phil and his wife do some really great things. No denying that. But when it comes to stocks he's kind of a degenerate gambler. Ive never seen anything like it. A "billionaire" trading pump and dump micro cap penny stocks. Using company funds to do so as well(held as "investments" and likely significantly overstated) and then in some cases buying them out.

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I'm outright short. Borrow is basically nil. Going into catalysts I'll sometimes waste money for piece of mind with a few OTM calls to hedge parts of the position, but at the end of the day, any pop is a gift with this turd. They have what I'd peg as less than a quarter of cash so they urgently need to do a capital raise. Last capital raise was announced at $2.20 or so and priced at $1.50.... I'd gander there may be a few more suckers right now given the promotion of the lab biz, but as we've seen with the hospitals, the economics of much of this corona related business activity arent great. They currently lose like $1.30 for every $1 in revenue, and their much hyped junk like Rayaldee and 4K score will likely continue to be adversely effected on a demand basis due to the virus. So.... lab testing dollars at low margin vs high margin drugs? I'll take that trade

 

I hope Frosty the con man is loaning you the shares & gets his bag squeezed super hard.

 

---

 

edit: He's done a lot, and undoubtedly added to S. FL. The business side just seems so shady. I guess the end justifies the means.

 

www.floridatrend.com/article/8842/eye-for-innovation

 

I took a boat ride in Miami a few years ago and we passed his little shack on the water.

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  • 2 months later...

Greg - saw you added OPK short and wanted to share some of my thinking here and see where our thinking diverges. tldr; Earnings will be interesting. I bought July31/Aug 7th 6.5 calendar just to play the earnings.

 

Longer version:

OPK is getting a lot of love here. I was trying to figure out their best case scenario for revenue this quarter (all numbers are rounded up to the nearest whatever): Looks like they have capacity to do 35k/day (antigen/molecular) tests and abut 400k/day (antibody) tests. The costs of these tests range from $100-$2,000 (crazy things are happening in TX) with some news outlets reporting that most government entities paying $200-$300/test. 90 days * 435k*$200 = $7.8B if they max out their capacity. No way they get near that.

 

MLS and NFL contracts are nice to have but largely meaningless.  NFL team has 55 players max on the roster and let's say 8:1 ratio of support to player = that's 440 tests/day. 32 teams = ~15k tests/day and that number will go down as they will switch to test every other day. I'd imagine similar math for MLS teams.

 

US is doing ~750k tests/day. Squaring this off against the covid tracking, it looks like they are running about 5% of tests so about 40k tests/day. So this Q they'll get $800M revenue from COVID activities.

 

 

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Yea, I definitely agree. The contracts across the board are impressive. But you'd also think they are competitively bid, and margins must be thin. These guys arent doing anything proprietary, just providing a commodity service. Nonetheless numbers should be huge, optically at least. This will be a tailwind, but I think more importantly it will be great promo material for these guys. I took the original OPK to the moon ride in 2014 or so. Started shorting in 8s and finished around 16. Quite the pain trade but no doubt you have two things working for you when you short a company like this...time is on your side, and management is always working very hard for you!

 

I would just caution now that since you clearly have the momo and RH crowd behind this, dont underestimate the games these guys know how to play. The press releases come fast and furious; if there is one thing these guys know how to do it is milk the capital markets and they have several 5th tier retail brokerage shops, like LT doing their bidding. Borrow fee is still very low, so keep an eye on that. Once it broke $3s I bought some Sept $4 and $5 calls to hedge out a bit.

 

To put into perspective what you're dealing with here, ask yourself...what kind of company goes on "Mad Money", a show targeting retail investors, to make major announcements? Very predatory. The downside longer term from a short perspective is that if they effectively drop a secondary here, Thats potentially enough funding for 2 more years...which puts the bankruptcy out of reach as a shorter term trade.

 

 

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I wonder how folks go about risk management in a case like this. This was written up as a short on May 7 and the stock closed at  $1.95 and a high of $2.31 that day. It is now at $5.85.

 

It may ultimately go to zero at some point, but if it goes to $10 first, it really wasn’t a good short.

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I wonder how folks go about risk management in a case like this. This was written up as a short on May 7 and the stock closed at  $1.95 and a high of $2.31 that day. It is now at $5.85.

 

It may ultimately go to zero at some point, but if it goes to $10 first, it really wasn’t a good short.

 

I shorted a small position with a 1/3 call bear spread. Very much under water with it but it was a tiny, let's call it tracking, position. Now that it's at $5.85, I'll wait for the secondary or COVID cure/vaccine to get 4/5 or 5/6 call bear spreads.

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I posted here earlier but seems it disappeared(nothing political or bad, same with a couple other posts from same period this morning)

 

Anyway, in summary...

 

Shorting isn't for everyone. I was taught that if you cant manage a position going against you 5-10x while still being able to add to it, dont short. These things, especially p&d's do this kind of stuff(I currently am aware of 3 promotions here). Options are almost always severely mis priced when things are dormant. IE The stocks dont move 5%, they either go ballistic to the upside or just grind lower towards their eventual fair value of 0. So a month or two ago you could buy $5 calls for 20c going out to September. But once they move, the options because total sucker bets. You've had 50c on the $6's going out a week or two yesterday, and puts at $5 going out a few months cost $1.5....

 

But, as for it going to $10 or whatever, I mean why wouldn't that just be a bonus? If it goes against you and you can add to it, all the better. Like I mentioned, last go around with this, I sat on an $8 starter and shorted up to $16, took maybe a year of momo to ride out, eventually went down 95%...I still haven't covered. The only way you lose with these is if you get stopped out*, or cant handle the volatility**.

 

*Even if you get squeezed you can always exercise your options or box out your type 5 account with a long in a type 2, just to weather the storm.

 

**Again, this is largely just volatility, if you pay attention to the fundamentals, that stuff shouldn't be so concerning, I mean why short a p&d if you end up getting shaken out during the p...

 

It doesnt take much work to see what kind of people are driving this....exhbit 1 of MANY

 

https://stocktwits.com/Vaxy/message/229756033

 

Putting into perspective these contracts, the NFL one is for $75M.... assuming a stupid high 50% margin(not even close, look at LH and other peers for comps), thats less than 2 months cash burn...

 

Shorting is tough, and there's no such thing as easy money(except SPAC IPO), but frauds and p&d, along with bankrupt to be companies are amongst the most reliable. You just have to be able to stomach the volatility, which again, if you're investing, and focused on the fundamentals, is a bit easier to handle.

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^ I never looked at Stocktwits, what a chess pool!

 

Anyways, the problem I have with shorting is that a small position (let’s say 0.5%) only gives you a potential for a small gain, while also exposing you to the pot. For large drawdowns or losses. In have tried this years ago and for me, it seems an iffy proposition and Just took away too much mental bandwidth and attention.

 

I’d have also listend to John Hampton’s talk ion Jolly Swagman’s podcast) and he spent a lot of time on risk management besides finding these shorts. His shorts are small (0.25-0.5% typically if I remember correctly) and he downtown toy monitors them as a portfolio, but makes most of his money on the long side. I don’t really think a private investor can pull this off generally.

 

I sparingly use index puts when I can buy them cheap for risk management and hopefully gains, but with a VIX of ~25, I find they way to pricy so I haven’t been Doing anything on the dark wide since February and even if I do, it’s usually small. I think the risk of blowing up my portfolio with shorts would be higher then blowing it up long only.

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  • 2 weeks later...

Greg - saw you added OPK short and wanted to share some of my thinking here and see where our thinking diverges. tldr; Earnings will be interesting. I bought July31/Aug 7th 6.5 calendar just to play the earnings.

 

Longer version:

OPK is getting a lot of love here. I was trying to figure out their best case scenario for revenue this quarter (all numbers are rounded up to the nearest whatever): Looks like they have capacity to do 35k/day (antigen/molecular) tests and abut 400k/day (antibody) tests. The costs of these tests range from $100-$2,000 (crazy things are happening in TX) with some news outlets reporting that most government entities paying $200-$300/test. 90 days * 435k*$200 = $7.8B if they max out their capacity. No way they get near that.

 

MLS and NFL contracts are nice to have but largely meaningless.  NFL team has 55 players max on the roster and let's say 8:1 ratio of support to player = that's 440 tests/day. 32 teams = ~15k tests/day and that number will go down as they will switch to test every other day. I'd imagine similar math for MLS teams.

 

US is doing ~750k tests/day. Squaring this off against the covid tracking, it looks like they are running about 5% of tests so about 40k tests/day. So this Q they'll get $800M revenue from COVID activities.

 

With earnings out - 2 million tests for the quarter with $60 reimbursement rate. Looks like my best case and my reasonable scenarios were wildly optimistic on both volume and price. They are clearly experiencing supply chain issues so I'd be surprised if they can get to 4 million tests next quarter. I'm skeptical.

 

Either way, they will be breaking even to earning a bit for the foreseeable future. I might close out the short and wait for a vaccine to come out to re-short. 

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