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Expert Financial Analysis and Reporting

Northwest Biotherapeutics and the Robinhood Trading Phenomenon (NWBO), Buy, $1.59)

Stunning Stock Price Movements for GameStop and AMC Entertainment

There has been a lot of news coverage this week about the trading of two stocks which have for some time been the subjects of intense short selling: the videogame retailer GameStop Corp.(GME)and the theater chain AMC Entertainment (AMC). On January 21, GME closed at $43.03 but as of January 27, it closed at $347.51, an eight fold increase. There were no press releases during or immediately prior to this period. On January 21, AMC closed at $2.98 and on January 27, it closed at $19.90, a seven fold increase. There was a meaningful press release on January 25 that reported that since December 14, 2020, AMC had successfully raised or signed commitment letters to receive $917 million of new equity and debt capital that should allow the company to make it through the coronavirus-impacted winter.

Widespread news reports have attributed these stunning price moves to a coordinated action by retail investors trading through Robinhood and similar trading platforms to squeeze the shorts. Allegedly, message boards were used to fan the flames of speculation. Short sellers have been massacred and are crying foul and calling for regulatory action. The news reports have labeled this as Main Street versus Wall Street. I find this ironic. It is like a world class chess player losing to me in a chess match.

Wall Street’s Short Selling Scam

For those of you who follow my work, you may have seen my analyses as to how investment bank trading departments of some of the most well-known firms on Wall Street coordinate with hedge funds to launch bear raids on companies that often devastate retail investors; Northwest Biotherapeutics immediately comes to mind. If you would like more detail, you can follow this link. These partners in crime have a time tested playbook that uses a coordinated approach that is heavily dependent on illegal naked shorting by the investment bank traders and manipulation of public opinion by the hedge funds.

Here is how it works. A hedge fund that is short a stock publishes a report designed to panic investors; the preferred venue for this is Seeking Alpha. Then a wolfpack of closely tied together hedge funds rush in to short the stock and the investment banks sell huge amounts of phantom stock via illegal naked shorting that can overwhelm buy interest. The manipulated weakness in the stock then validates the wild, negatively biased report from the hedge fund. The intent is to shatter investor confidence and create a downward spiral in the stock. The holy grail for these thugs is to bankrupt a company.

This is a major source of profits for all parties in the short selling scam and amounts to one of the largest criminal enterprises in the world. They have operated with impunity for over 20 years with nothing to deter them until now. They have been swimming in tranquil waters with nothing to disturb them, but suddenly they are confronted with a vast school of hungry sharks in the form of retail investors. Some of the most well known short sellers are claiming foul and crying out to the Biden regime to do something about it. Talk about ironies.

I have a couple of thoughts on this. First of all, I am extremely pleased to see the shorts getting hammered. This is the first time that they have come up against anything that can threaten short selling schemes which in many cases have been a sure fire, bulletproof way of making money. One newspaper report pegged short losses at $26 billion on GME. It has to make shorts engaged in criminal stock manipulation schemes very nervous with existing short positions or to step up attacks on current targets or to launch an assault on new companies. I see this as a great societal benefit.

Read Through to Northwest Biotherapeutics

In terms of a read through to companies I am involved with, I immediately would point to Northwest Biotherapeutics. This company has been the subject of a seven year short selling attack which may have resulted in hundreds of millions of phantom shares created through illegal naked shorting as well as legitimate shorting. However, Northwest is in a very different position than GME or AMC. It soon should report extremely important topline data on its phase 3 trial of DCVax-L in newly diagnosed glioblastoma. Based on blinded data from the trial there is reason to believe that the trial will be successful and could be a major advance in this devastating disease. If this trial is successful, there would be a legitimate reason for a sharp upward move in the stock price. Adding on this new Robinhood phenomenon would be throwing gasoline on a fire.

I am not urging the Robinhood traders to play the same game with Northwest as they did with GameStop. There is a danger that in addition to squeezing shorts that innocent investors could be lured in at exorbitant and unwarranted prices. However, this is a real factor in the current market that  investors and short sellers involved in Northwest must consider. Of course, in the long run this is just a side show as ultimately everything hinges on the outcome of the DCVax-L trial.

As I was writing this, in late breaking news Speaker Pelosi has called for a Congressional investigation into the GameStop trading. If Congress does go ahead, they should also investigate why GME and AMC had such heavy short positions that inflamed the short squeeze. Such an investigation if done properly would unveil the Wall Street shorting scam, an unintended consequence. Call me a cynic, but I don’t think the latter will happen. Wall Street throws too much money at politicians.

 

 

 


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