Just as we warned was very likely last Friday, [7]KBIO is going full Volkwsagen up another 150% today alone (up from $1 last Wednesday to over $45 today), the stock has just been halted halted again halted for the 3rd time.
Here is what we said may be happening:
In other words, Shkreli's consortium had acquired 70% of the company, and should they decide to pull the borrow, on the odd chance that the short interest had soared to above 30%, KBIO - which until a few days ago - suddenly has the potential to become the next Volkswagen: a company which has more shares short than there is float available to cover them.
And, as of today, it appears to be happening just as previewed:
From 44c to $45.82 in a week...
[8]
What's the Bid/Ask spread in $KBIO [9]? Anywhere from 7 cents to 7 bucks apparently! pic.twitter.com/hMxb9n3NHp [10]
— Eric Scott Hunsader (@nanexllc) November 23, 2015 [11]
It seems we were spot on:
What happens if Shkreli's plan is indeed to rerun the "Volkswagen" scenario and unleash an epic short squeeze that sends the price of the company into the stratosphere, unlinked from any fundamentals, but merely soaring ever higher as desperate shorts pay any price just to get out.
We hope to find out as suddenly this until recently bankrupt company whose price has exploded in the past two days, has become not only a poster child for everything broken and manipulated with the market (think 2014's CYNK one year forward) but has the market following with morbid to find out how the tragicomedy of "Shkreli vs the Shorters" concludes.
And here is the punchline: According to Markit, the short interest of float is now 38% up from just 5.7% on November 13!
Why is this a problem?
Because Shrekli's investor "group" bought 70% of the company stock. If they pull the borrow and demand delivery, there will simply not be enough shares outstanding to satisfy all shorts, leading to, drumroll, the next Volkswagen.
So is this next for the recently bankrupt company?
[12]
Then again...
Turnaround in progress. $KBIO [9] pic.twitter.com/5dseMG3B8I [13]
— Martin Shkreli (@MartinShkreli) November 23, 2015 [14]
