Upfront note: this article is talking about two risky / small / strange stocks in SCLX and SRNE. I’ll disclose I bought a few SCLX warrants on a lark, so I do have a position here but it is an incredibly small one. On top of mentioning risky/small/strange stocks, this post is going to discuss shorting. I just can’t overemphasize how much risk and uncertainty is involved here; this isn’t investing advice and you should absolutely do your own research. Also, a quick
I'm long SCLX, which I think is the best vehicle for exploiting this situation.
You omit discussing the fundamentals of SRNE and SCLX, no doubt for brevity, but as you are no doubt aware, SCLX has been executing well in terms of getting coverage for and selling ZTlido® and in progressing their pipeline, including SP-102, which is in P3 trials for sciatica pain.
I think SCLX is the preferred vehicle since:
1. It's the subject of the orchestrated short squeeze (duh ... most professional investors are too smart for their own good, so KISS and embrace your squeeze)
2. If you're playing the squeeze rather than fundamentals, by definition you don't care about SOTP, so forget about SRNE
3. While SCLXW theoretically offers more leverage, you likewise shouldn't expect SCLXW to reflect the squeezed value of SCLX (as evidenced by today's price action, where at the time of ranting, SCLX is up more than SCLXW)
4. SCLX is also more liquid than SCLXW, and since it trades 4.5x higher, you can put more capital to work.
I'm looking forward to the sequel where you discus the endgame for SRNE.
Which risk manager of a fund short $SRNE shares would sign up on staying short in the process?
Calendar looks as follows. Announcement of div December 30, 2022. Record date for dividend was January 9, 2023. Payment date for the Dividend Stock was January 19, 2023.
Short interest was stable in last reports around 62.479m shares. Last report January 13.
There was ample liquidity, more than 10m shares volume per trading day, to cover.
We will find out tomorrow February 9 if short interest has been reduced. This will be key imho.
Excellent article! I'm excited to watch this play out as an observer. If they are able to pull off this Ocean's 11 heist on the short sellers, could this be a new tool in a public company's tool box? Companies like SRNE w/ assets like SCLX that aren't being properly valued by the market could rather just issue them as these non-transferable special dividends? I'm just thinking out loud now but it brings up so many interesting questions. Thanks again for sharing!
If they spent a year planning a short squeeze and it doesn't work then that would be something! I bought a few warrants, now I shall put the popcorn in the microwave.
In light of the ch 11, I believe this attempt was a Hail Mary. I took a small loss. I wouldn’t be surprised if the court claws back the SCLX shares dividend.
Don't forget, SRNE CEO Henry Ji has infamously said bizarre things in the past about shorting SRNE....something like shorting SRNE will "ruin your family." Grab the popcorn indeed!
i checked in with the TD margin department and they indicated the short dividend shares were being margined at 100% -- however it's not clear to me what exactly happens if the account violates margin limits as a result. would be helpful if other readers checked in with their brokers and/or know people who are short the dividend who can check.
is anyone familiar with the $ostk special dividend situation in 2020? IIRC they also engineered a short squeeze by dividending out a non-transferable security
"the implied value of SRNE’s SCLX’s shares are worth much more than SCLX’s stock price" -- I think you mean SRNE's stock price here.
you are correct; fixed. thanks
I'm long SCLX, which I think is the best vehicle for exploiting this situation.
You omit discussing the fundamentals of SRNE and SCLX, no doubt for brevity, but as you are no doubt aware, SCLX has been executing well in terms of getting coverage for and selling ZTlido® and in progressing their pipeline, including SP-102, which is in P3 trials for sciatica pain.
I think SCLX is the preferred vehicle since:
1. It's the subject of the orchestrated short squeeze (duh ... most professional investors are too smart for their own good, so KISS and embrace your squeeze)
2. If you're playing the squeeze rather than fundamentals, by definition you don't care about SOTP, so forget about SRNE
3. While SCLXW theoretically offers more leverage, you likewise shouldn't expect SCLXW to reflect the squeezed value of SCLX (as evidenced by today's price action, where at the time of ranting, SCLX is up more than SCLXW)
4. SCLX is also more liquid than SCLXW, and since it trades 4.5x higher, you can put more capital to work.
I'm looking forward to the sequel where you discus the endgame for SRNE.
https://www.zerohedge.com/markets/sorrento-therapeutics-plunges-after-filing-chapter-11-bankruptcy-protection
Which risk manager of a fund short $SRNE shares would sign up on staying short in the process?
Calendar looks as follows. Announcement of div December 30, 2022. Record date for dividend was January 9, 2023. Payment date for the Dividend Stock was January 19, 2023.
Short interest was stable in last reports around 62.479m shares. Last report January 13.
There was ample liquidity, more than 10m shares volume per trading day, to cover.
We will find out tomorrow February 9 if short interest has been reduced. This will be key imho.
Record date is what is relevant... those short as of record date are on the hook for the dividend.
Excellent article! I'm excited to watch this play out as an observer. If they are able to pull off this Ocean's 11 heist on the short sellers, could this be a new tool in a public company's tool box? Companies like SRNE w/ assets like SCLX that aren't being properly valued by the market could rather just issue them as these non-transferable special dividends? I'm just thinking out loud now but it brings up so many interesting questions. Thanks again for sharing!
If they spent a year planning a short squeeze and it doesn't work then that would be something! I bought a few warrants, now I shall put the popcorn in the microwave.
In light of the ch 11, I believe this attempt was a Hail Mary. I took a small loss. I wouldn’t be surprised if the court claws back the SCLX shares dividend.
Any thoughts on the bankruptcy filing?
Don't forget, SRNE CEO Henry Ji has infamously said bizarre things in the past about shorting SRNE....something like shorting SRNE will "ruin your family." Grab the popcorn indeed!
i checked in with the TD margin department and they indicated the short dividend shares were being margined at 100% -- however it's not clear to me what exactly happens if the account violates margin limits as a result. would be helpful if other readers checked in with their brokers and/or know people who are short the dividend who can check.
How is SNRE going to profit? Once they start selling SCLX or SCLXW, won't the price collapse?
is anyone familiar with the $ostk special dividend situation in 2020? IIRC they also engineered a short squeeze by dividending out a non-transferable security
fyi every link to the 12/30 8-K by $srne instead points to the 11/4 10-Q by $sclx
UGH that's frustrating. Corrected in the article, but here's the correct 8-k in case I've missed it again:
https://www.bamsec.com/filing/110465922131357?cik=850261
Thanks Andrew. If/when do you expect the squeeze to occur?
Hi Andrew. Which do you think has the best risk/reward among SCLX, SCLXW and SRNE?
Given how crazy the situation is, I don't want to answer that..... but I did disclose a position in the first paragraph if that's helpful!
Thanks.
The company is now suing Bank of America, Merrill Lynch, JP Morgan Chase, Morgan Stanley, UBS, etc. for allowing naked short selling and getting an injunction to stop all short selling in SCLX shares. Read the court filing here: https://cases.stretto.com/public/x228/12086/PLEADINGS/1208606122380000000116.pdf