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Biotech / Medical : Biotech Shorts
XOMA 32.98-0.7%Oct 31 9:30 AM EST
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To: (no name provided) who wrote (1)12/13/1996 9:18:00 AM
From: Henry Niman   of 61
 
A note of caution on reading short tables. The leading Biotech
in the past (on days to cover) was my favorite, LGND. It had
a clear lead when volume dropped a few months ago, and its
3 million short shares represented something like 40 days to cover.
However, some short positions are actually arbitrage positions.
LGND has a a retinoid R&D company that provides $100 million to LGND
and AGN. The company, Allegan Ligand Retinoid Therapeutics, trades
as units, ALRIZ, on the NASDAQ. These units include 2 five year
warrants to buy LGND. An arbitrage position would short LGND and
use the funds to buy ALRIZ. The warrants in ALRIZ would cover
the short position and provide a profit as long as the ALRI shares
were called. I have been told by LGND investor relations that the
bulk of LGND's short position is actually an arbitrage postion.
The top 50 shareholders of any public company can be found at
stocksmart.com. 50% of ALRIZ's float are owned (as
of June 30, 1996 and there hasn't been enough ALRIZ volume since
then for significant changes) by Farallon Capital Management and
Thomas F. Steyer, et al. I believe that these two entities
have the bulk of the short position. 1 1/2 million shares of ALRIZ
(because each unit has 2 warrants) would be required to cover 3 million
shares of LGND. The two positions add up to just under 1 1/2 million
shares.

Henry
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