I first suggested this one at $6.30 18 months ago on the strength of a blog entry, and doubled up a few weeks later around $3 after the company was surprised by an unfavorable legal ruling. All this, of course, with money I could afford to lose. And bought more, a few weeks later, at $2. Ever since, it’s been limping along at around $3. Those of us who hold the shares have been hoping the legal ruling would be overturned . . . and that, in any event, Uncle Sam really may stockpile billions of dollars of its smallpox antidote.
So if you own shares — or don’t but were about to buy a little motor boat (wait! stop! buy SIGA instead! no drowning risk! no gasoline guzzling! no swabbing, caulking, or environmental impact!) — you may be interested in this update.
Jim Leff: “A friend who’s also a SIGA investor tells me that an investment analysis firm hired a distinguished Delaware judge to look over SIGA’s supreme court appeal and to share his findings for their big-wig investors. The judge agrees that the lower court decision (which “split the baby,” awarding the plaintiff half the future revenue from SIGA’s smallpox drug) was overreaching. He’s confident that SIGA will be on the hook for a much, much, much lower amount (that’s been my expectation, as well). This came to light late [yesterday] afternoon.
“I listened to the oral argument before the Delaware Supreme Court last month, and one judge seemed overtly skeptical of the ruling against SIGA. It turns out that he’s the most powerful and respected judge in the state. This corroborates the likeliness that the Court will drastically lower the penalty.
“SIGA has been playing possum throughout this legal dispute, doing everything possible to keep a low profile. That’s why we’re at $3 (even if the ruling stood, and SIGA lost half the billions in profits from their drug, they’d still be worth far more than $3). The Delaware Supreme Court prides itself on turning around decisions within 90-120 days (usually 90) of oral argument, so that puts a likely decision around mid-April.
“Meanwhile, biological weapons, including smallpox, are very much in the news, particularly weaponized smallpox (thought to be held by Iran, North Korea, and Syria), which vaccines do NOT address, but which SIGA’s drug very likely does (depending on how novel the weaponization techniques are….i.e. if it’s anything like pox, SIGA’s drug is good).
“It made curiously little news, but Israel has flown inside Syria’s borders to attack chemical and biological weapons stores. So smallpox is a big, big deal, and Israel has publicly included SIGA in its war scenario planning for several years. I expect an order there. Also meanwhile, the FDA approved a drug called raxibacumab against anthrax, based solely on animal testing. This has been the hold-up for SIGA with FDA — it’s not possible to test smallpox on humans, so you must resort to monkeys, and that’s not standard for FDA. But it appears FDA has finally accepted the standard, which is very good news. (Either way, though, SIGA doesn’t require FDA approval to keep selling to the government for their emergency stockpile, and the government has explicitly stated its attention to acquire billions of dollars worth of this drug.) I think it’s quite likely this could turn out well, although it could take time to shake out: the decision may remand back to the lower court to finalize, plus it will take time for SIGA to regain momentum and re-attract skittish investors. But I’m quite confident.”
☞ And confidence goeth before a fall. Or is that pride? Either way, let me stress: (1) I have not verified any of this independently and, as best I can recall, have never even had chickenpox — I had mumps — though when we were kids my older brother used to say things like, “Egad! A pox upon it!” (2) If you do decide to speculate in this stock, you must do so only with money you can truly afford to lose. It’s all part of my overall notion that if you do want to expose a bunch of money to the stock market, most of that should be done (via dollar-cost averaging and only for the very long term) through low-expense equally-weighted or fundamentally-weighted index funds or ETFs . . . but maybe 10% of your stock market stash should be in a play money account, split over a handful of my idiot speculations. That serves two, or conceivably three, purposes. First, it can be fun and a better place to channel your dream of big winnings than weekly lottery-ticket purchases. Some of us just need this, psychologically. Second, if over the years you merely break even with these speculations (though of course there’s no guarantee you’ll do even that well), you come out ahead, because of the “tax control” they give you: Use your losers to lower your taxable income by up to $3,000 a year (with any extra rolling forward to future years); use your winners, if held more than a year, to fund the charitable giving you would have done anyway (via the Fidelity Gift Fund or one of the others), which is both more convenient and, after-tax, less expensive than giving cash. You’ve broken even, yet, after tax, you’ve come out ahead. (Read my book.) Third, it’s conceivable you will do better than break even. After all, what is life without hope? Health first; then hope. If you have those two, and a high-speed Internet connection, happiness is surely yours.
Have a great weekend.
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