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Expert Financial Analysis and Reporting

Some Thoughts on Short Selling of Biotechnology Stocks (Paid Subscribers)

I am a fundamentalist and am long term oriented. However, there is a darker side to the market that requires skills that I do not possess. This is the world of short term trading and short selling. When I first started my career as an analyst, short selling was not much of an issue. However with the rise of hedge funds, some investors have become fabulously successful through employing short term trading and short selling techniques.


Last week, we saw this in action with the stock behavior of Northwest Biotherapeutics (NWBO) . Following the announcement of gaining approval for early access for DCVax-L in Germany, the stock took off like a rocket. It reached an intraday high of $10.64 on Tuesday March 11. This was an appropriate price level, in my opinion for such stunning news. Actually, I thought it could go much higher.


Then Adam Feuerstein of put out a very negative, concocted article late in the day and the stock closed at $9.18 on March 11. It has continued to trend down since and closed at $7.72 on Friday March 14. Within moments of the Feuerstein article there was a flood of hedge fund short selling. Feuerstein is very well connected with hedge funds and frequently cites information gained from them as sources of his articles. In addition, he has over 32,000 followers on Twitter which gives him great power in the short term.


As a journalist, Feuerstein has complete freedom of speech and can make any claim that he cares to. He is free to concoct any theory, no matter how inaccurate it may be, and there is no institution that can keep him from putting it out as fact. No matter how off base his analysis may be there is no mechanism for controlling his content. The article that Feuerstein published on Tuesday was based on a theory that no Wall Street analyst would concoct; a brokerage firm’s compliance officer would slam it down in a minute. Here is the link to Feuerstein’s article.


It appears that coordinated short selling based on the Feuerstein article has resulted in a bear raid of major proportions on this tiny company. In an effort to understand this, I went to the Internet to find some articles that give an insight into Jim Cramer. Cramer is Feuerstein’s boss at and Feuerstein’s mentor. Feuerstein has learned at the elbow of the master how to bluster and obfuscate. Here is the link to an interview with Cramer in which he describe the technique he uses to short stocks. The link is

I think that The is trying to take this post down based on copyrights issues. If you can not get it, there is an excellent analysis of how shorts manipulate stock prices over periods of time in a Seeking Alpha article. It relates how Cramer recommends that hedge funds engage in this type of activity because it is "a very quick way to make money"." It is amazing to me that someone so prominently featured on CNBC can be such a vocal advocate of a practice that allows hedge fund managers to make money at the expense of legitimate investors and damaging and destroying promising companies in the process. Feuerstein has learned well at the elbow of the master. Here is the link to the Seeking Alpha article


While I was at it, I found still another video on Cramer that you might find amusing. Jon Stewart called Cramer out on his recommendation of Bear Stearns. Eleven days before Bear Stearns plunged to $2, Cramer recommended purchase at $67 and continued to do so all the way down. Cramer repeatedly states on his CNBC program Mad Money, how skilled and successful he is an investor although there is no way to judge his track record. Here is his call on Bear Stearns. You be the judge. The link is


So what should investors do with Northwest Biotherapeutics stock? The short selling has terrorized investors and neutralized the effects of the effects of the German approval. My recommendation is to stay the course and I am looking to buy the stock, not sell it. It could be a rocky go, but the enormous importance of the German approval will eventually win out. We can expect negative articles from Feuerstein and coordinated short selling in the future, but the stock can’t be manipulated forever.





Categorized as Smith On Stocks Blog


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