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Biotech / Medical : Gliatech (GLIA)
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To: jeffbas who wrote (1388)2/27/2000 8:29:00 PM
From: Biomaven  Read Replies (2) of 2001
 
jeffrey,

In my opinion, the only rational explanation for the large increase in short interest in the last month AFTER the FDA problem was resolved is conviction that there is a potentially serious problem.

Here I beg to differ with you.

Although in general shorts are more sophisticated than longs, I have to say that in biotechland over the past year or two the shorts have generally been wildly wrong. There have been a few noticeable exceptions, with some good calls by Avalon on FDA approval issues, but even these have recently been balanced with some equivalent offsetting flubs by Avalon.

I've seen a couple of "short this pig" analyses on various biotechs by fairly sophisticated outfits like Sturza. While superficially convincing, when you examine the details of their analyses you find gaping holes, tendentious statements and general misinformation.

It is easy for a boutique biotech outfit (like Avalon or Sturza) to convince the average non-biotech hedge fund that a particular biotech is overpriced. I could write an analysis of pretty much any biotech you name that would start most would-be shorts salivating.

Thus at this point I no longer view a high short position in a biotech as a particular warning sign. It does mean that there is likely to be increased rumor-mongering and misinformation, but you need to ignore this and stick with your own analysis.

In general over the last two years I have done very well indeed taking positions in respectable but heavily-shorted biotechs during their dips.

Peter
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