Martin Shkreli's KaloBios Files Chapter 11: Full Bankruptcy Filing

Over a month ago, when observing (from as far away as possible) the farce of Marti Shkreli's attempt to squeeze KBIO shorts in the context of the infamous Joe Campbell who was short KaloBios only to suffer a $100K margin call overnight when Martin Shkreli bought a 70% stake in the company, we wrote:

Which brings us back to Joe Campbell and his now famous margin call: did he liquidate enough other assets to cover the margin call? What about the hundreds of other shorts who piggybacked and shorted at the close yesterday only to wake up with comparable massive margin calls?

 

And 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 fascination to find out how the tragicomedy of "Shkreli vs the Shorters" concludes.

We now know how the story ends: less than two months after KaloBios had commenced liquidation proceedings, only to be saved in the last moment by a Martin Shkreli liquidity injection, the company is right back in bankruptcy court having just filed for Chapter 11 creditor relief in Delaware bankruptcy court. This takes place a week after it lost two more directors and the Nasdaq stock market decided to delist its shares.

In its bankruptcy filing, KBIO lists $8.4 million in assets and $1.9 milion in debt.

 

How did the company's truncated board decide on a Chapter 11 filing? From the filing:

Effective as of this 29th day of December, 2015, pursuant to a special telephonic meeting on the same date, the board of directors (collectively, the “Board of Directors”) of KaloBios Pharmaceuticals, Inc., a Delaware corporation (the “Corporation”), upon a motion duly made and acting pursuant to the Corporation’s organizational documents, took the following actions and adopted the following resolutions:

 

WHEREAS, the Board of Directors has considered information regarding the liabilities and liquidity of the Corporation, the strategic alternatives available to the Corporation, and the impact of the foregoing on the Corporation’s business; and

 

WHEREAS, the Board of Directors has had the opportunity to consult with the Corporation’s management and financial and legal advisors to fully consider each of the strategic alternatives available to the Corporation; and

 

WHEREAS, the Board of Directors has been presented with a proposed petition to be filed by the Corporation in the United States Bankruptcy Court for the District of Delaware (the “Bankruptcy Court”) seeking relief under the provisions of chapter 11 of title 11 of the United States Code, 11 U.S.C. §§ 101 et seq. (as amended, the “Bankruptcy Code”); and

 

WHEREAS, the Board of Directors desires to approve the following resolutions

 

NOW, THEREFORE, BE IT RESOLVED, that in the judgment of the Board of Directors, it is desirable and in the best interests of the Corporation, the creditors of the Corporation, and other interested parties that a voluntary petition (the “Petition”) be filed in the Bankruptcy Court by the Corporation to initiate a bankruptcy case (the “Chapter 11 Case”) under the provisions of chapter 11 of the Bankruptcy Code;

Thus ends KaloBios' "turnaround in progress" - two months after it was dragged out of bankruptcy by Martin Shkreli in an attempt to crush the company's shorts and unleash a massive squeeze, Kalobios is again, well, bankrupt.

 

The full filing is below: