GUESS WHO’S CRITICIZING THE SUPREME COURT?
Lifelong Republican Sandra Day O’Connor . . . as reported here. The former Justice believes the 5-4 ruling in the Citizens United case (that went out of its way to unfetter corporate influence on elections) was wrong, harmful, and dangerous.
She is not alone. Apparently, “A February poll by ABC News found that 72 percent of Americans favor efforts to re-institute limits on corporate and union spending in elections, including 63 percent of conservatives.”
Esther C.: “After selling a few of the BZ warrants you suggested, I still have 7,150 left. I bought them for 8 cents each and now they’re 88 cents. I am confused as to how this works. The stock is approaching $7.50. I know I have the right to buy the stock at $7.50. Do I exercise this right as soon as it reaches the strike price? ”
☞ No! The simplest and safest thing to do, especially as you’ve now owned the warrants more than a year (and thus qualify for long-term capital gains treatment) is sell them. It’s not every day you make 11 times your money so fast.
As you say, each warrant gives you the right to buy a share for $7.50 – but that right is only valuable to the extent the stock is higher than $7.50. The right to buy a $7.50 stock for $7.50 is worth exactly zero! So you definitely would not want to waste them by exercising them when the stock is at $7.50.
The reason the warrants have value is the possibility – however slim – that the stock might be $8 – or $10! – or $12! – before they expire in June 18, 2011. At $12, each one would be worth $3.50!
If I were you, I’d sell 5,000 now and just wait to see what happens with the rest.
Sharp-eyed readers will remember I have suggested buying puts – most recently, last week – albeit only with money you can truly afford to lose.
The moment of truth may be approaching.
“In much of the world,” reports Investors Business Daily, “May Day is a festive event. Worldwide, Mayday is a call for help. For Dendreon (DNDN), May 1, May Day, likely will be a celebration, not a distress call. On that date, the company is expected to get Food and Drug Administration approval for its prostate cancer drug, Provenge.”
But not everyone expects that. Here are the May 1 scenarios my guru sees:
1. Dendreon gets approval as expected. Stock rallies several points. Perhaps the bulls are right and it triples over the next year.
2. Dendreon gets a delay because the FDA just hasn’t completed its review. Hopes to complete the review “soon.” Stock sells off several points, but should remain in the 30’s. It’s a trade-off between the bears, who will say this delay is a smoking gun for something more seriously wrong with the application, and the bulls, who say it is just a matter of some clerical issues. Puts will undoubtedly rise.
3. Dendreon gets a delay and the FDA announces that they will be reviewing it at the July 15 oncology panel. Stock drops immediately to the high teens or low twenties as the prospect of rejection gets factored in. Puts will skyrocket.
4. Dendreon gets a “complete response” letter citing manufacturing problems and an “indefinite delay.” Stock will drop 15 or so points. Then it depends on how much color the company can provide on the issues and when they will be resolved. I give this low odds of happening, but something to consider.
5. Dendreon gets a “complete response” letter citing the need for an additional trial to establish efficacy. Stock opens at 5 and sells to 2. I continue to expect this as the most probable outcome, but 2 and 3 above have a reasonable chance of occurring. I continue to hear rumors that the FDA will indeed convene a panel. Nothing has been announced so far.
☞ If the drug is approved, we lose 100% of the value of the puts. If a new trial is required and the stock collapses, we make maybe 500% (depending on which puts you chose – I have some that expire in August, some in January, some in January 2012, and at various strike prices).
Bruce Katzman: “I finally had to give up Managing Your Money when the Mac stopped supporting the ‘Classic’ environment. I auditioned a lot of new programs and settled in on one called iBank. It is not as smart, as flexible, as intuitive or as useful as MYM was, BUT it is the only one (for my money) that comes close. They have a very friendly and responsive staff and customer service and they seem to be very open to customer suggestions. Version 4 may be out by the end of the year (we hope). Just letting you know in case others come calling for recommendations.”
Charles loves it. It is very hard to get his attention anymore.
Quote of the Day
The people who sustain the worst losses are usually the ones who overreach. And it's not necessary: steady, moderate gains will get you where you want to go.~John Train
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