XBiotech Inc (NASDAQ:XBIT)
XBiotech Inc (NASDAQ:XBIT) shares continue to take a pounding losing over 68% for the week. XBIT shares opened last week at $10.28 and in the first fifteen minutes of trading hit their weekly high of $10.30 before dropping below $10 and trading between $9.00 and $10.00 through the end of Thursday’s trading session. Then on Thursday the bottom dropped out in the last hour of trading after a report was released by the Austin, TX-based biotech company that relayed the findings of an independent data monitoring committee recommending the cessation of the company’s Phase 3 trial. The trial involved XBiotech Inc (NASDAQ:XBIT)’s treatment for colorectal cancer and while the interim findings lacked any concerns about the treatment’s safety profile, the independent committee concluded that the efficacy endpoints would not be met.
That news caused the NASDAQ to halt trading in shares of XBiotech Inc (NASDAQ:XBIT). After the halt was lifted XBIT shares dropped over 60% to close at $3.20. That is less than half the $7.32 that was the 52-week low when the trading day began. Ironically, a major investment research firm based out of Chicago had, on Tuesday, published an article on its view of the upside potential for XBIT shares. From the article – “the potential for a big move higher is definitely there.” Less than ten weeks ago, XBiotech Inc (NASDAQ:XBIT) shares had briefly traded over $20 before bad news continued to hit the company and erode investor confidence.
Friday’s sell-off came on heavy volume. Heavy volumes are usually seen as confirmation of major moves. In this case, Friday volumes were over eight times that of XBIT’s 30-day, daily volume averages. That made short-sellers happy – and there are plenty of them. Over 20% of the share’s float is represented by short-sellers. Given the normally low volume trading in XBIT shares, that produces a short ratio of over 19 – meaning on typical volumes it could take 19 days to cover short-sales without adversely impacting the price for anyone trying to cover their short. But, truthfully, who would be wanting to cover their short-sales? Biotech firms can, and do, trade under their cash/share figure and XBiotech Inc (NASDAQ:XBIT) has a cash/share figure of $1.55 – or less than 50% of where the current trading levels are. So many are likely looking at XBIT and seeing a lot of potential for further downside.
I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. All information, or data, is provided with no guarantees of accuracy.
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About the author: James Marion is a University of Houston student studying Business with a concentration in Finance. James has interned with several investment professionals and hopes to pursue a career as a professional stock analyst after graduation.