Saturday Morning Update — On Riot/Bioptix (backgrounder) — I Couldn’t Make This Stuff Up!
AHEM. The Newly-Minted CEO/Chairman Just SOLD 40 Per Cent Of His Holdings — and, he did so on the last business day of the quarter and year, and in the open market to boot.
That sort of nonsense — by a CEO. . . is usually frowned upon, at public companies. [Full new website on this, here.]
Let’s put to the side (for now) the questions about whether he probably already has some “Kentucky windage” on the company’s year end results — though that is a significant peril here — and let’s just focus on the now-delayed Annual Meeting of Stockholders.
Mr. O’Rouke certainly knows far more fully why the meeting was delayed (and the best face on that is the embarrassing notion that RIOT, despite being a ’34 Act reporting public company for several years, didn’t think far enough ahead — on a rudimentary basis — to hire a proxy solicitor, to get the broker non-vote positions in)… And the worst case is… that he (allegedly) likely knows that a shareholder revolt is forming — of some sort, due to poor operating results, and a crazy increase in equity for management (being proposed).
Yet there he is — selling a huge block of shares on the NASDAQ — at around $28.55, while all his public statements claim the company is a rising star, and has been unfairly targeted by short sellers like Citron — and has thus seen a near term price ditch (which he would say) is entirely temporary. Uh-huh.
So why would he sell, effectively at the bottom?
I would suggest that he did so, because he knows — in the near term, $28.50 a share is… (nearly) the top.
A sincere late night thanks goes to Billy the Kid for this heads up.
As ever, more to come.
Confidential Nota Bene: But personally, I wonder if he needs it to fund his lawyers, in this 2017 jilted investor affirmative lawsuit — against entities affiliated with the legendary and… mercurial John McAfee. And I additionally wonder if he intends to run that complained-of playbook, but in reverse this time, at RIOT Blockchain.
नमस्ते
Martin Shkreli: Transitioning... To A Free Man. 
My guess is the CEO will claim he had a 10b-5 plan in place. Sometimes the Form 4 will have a footnote indicating “sale pursuant to 10b-5 plan,” but there is nothing in the SEC rules that make it necessary to disclose the use of Rule 10b5-1 to the public.
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I suppose that is possible, but I’ll say… unlikely.
I’ll explain in a week or two what my phone calls to the company, and outside counsel have revealed…
I could get surprised… but it would not be consistent with what I’ve been told.
Namaste — Thanks R. West! Good stuff!
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Found something very interesting….
https://www.pacermonitor.com/public/case/23365094/Painter_v_Turing_Pharmaceuticals_AG
Civil Case in EDNY filed December 28- Painter v. Turing Pharma 1:17-cv-07558
https://www.pacermonitor.com/public/case/23351977/PAINTER
Edward Painter, on the Board of Directors at Turing/Vyera, has filled a civil suit against Turing/Martin, but I was under the impression the Painter was a close friend of Martin/”on his side.” Not sure what the filing actually says due to the paywall though.
https://endpts.com/scoop-martin-shkreli-bats-back-a-coup-at-turing-new-board-considers-a-sale-of-assets/ (article announcing Painter joining board)
Painter also runs A2A Pharma https://www.a2apharma.com/
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Great find! While we wait for the briefs tonight on Mr. Greebel’s jury verdict…
The newly filed action claims Mr. Painter was promised a 5% royalty on BENZ sales, at Turing (not KaloBios) by Marty; that he was pressured to put $275K of his OWN money into Turing (now called Vyera)….
But he says he was never issued his stock certificate; additionally it claims that Mr. Painter had “connected” Savant to Marty, and Marty had promised to do the BENZ deal inside Turing — not KaloBios (now called Humanigen)….
And that Mr. Painter was never paid his $50,000 severance when he was terminated by Vyera last year — he had been head of investor relations there, or so says the suit.
I’ll post more on it tomorrow at lunch!
Namaste — and a happy if frigid 2018!
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Ugh! Is John McAfee somehow involved here? Did you see the Netflix Documentary on him? Even if it was half true McAfee should be in jail.
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I did see that doc. — and no I think he has no role in RIOT… but he is being sued by RIOT’s current CEO, and a former 11 per cent holder of what became RIOT by the name of Honig…
It seems each side tried to fleece the other — in that suit pending in federal court in Manhattan.
The complained of loss is $46 million.
All very entertaining!
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Beautiful
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https://twitter.com/CitronResearch/status/944220692211425281
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Earlier in the week, Citron hailed RIOT as a tailor made short opportunity… hah!
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Did you watch the video of Left describing his GBTC short?
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I did — and he’s right (about GBTC). I’ve chosen RIOT for my put strategy because it too is pretty liquid — and I understand well the company it USED to be… and NONE of its businesses (new or old) will support a $300 million market cap — before a decade from now.
So… the only question now, given the CEO’s very troubling sale of $880,000 of his stock Friday — is do I double up on more puts — with even shorter expiries — out of the money? That’s something to ponder while I watch New Years Day bowl games… before Tuesday’s NASDAQ open.
I was well pleased with Northwestern last night though!
Namaste man!
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I always operate with the old Wall St saying: “Those who know don’t say and those who say don’t know”. That applies especially to those practicing “risk-less” arbitrage, as Citron was with their Short GBTC/Long BTC Futures idea. If there really were inefficiencies there that presented such a profit potential as Left outlined, why would you go on TV and disclose that? Why not try to borrow as many shares as possible and continue until the inefficiency had played out. He did that interview at the peak. That’s just weird. I get that maybe he had been disciplined and already put on the size position he wanted. But that too is weird for a hedge fund. Those opportunities don’t present themselves very often and hedge fund guys are famous for levering up a sure thing. I know it’s only partially related to the main topic her, RIOT. But it’s interesting to note.
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I think Left saw — like others — that he hasn’t access to nearly enough capital to force this inefficiency out of the gap between futures, and the GBTC (and similar) funds.
I am sure he deployed a LOT of his capital, then went on TV, as the inefficiency he identified has still largely persisted — even as of Dec. 29.
It is hard to explain how voracious the uniformed appetite (retail and dumb, on the long side) has been.
And it will take essentially ALL the big players, acting in unison — to begin to close that gap.
Which again, is why I chose an individual equity. RIOT may benefit slightly, if bitcoin rises — but its fortunes (quite meager at present, in reality), are mostly divorced on the downside — from what Mr. Left was talking about.
But separately, and importantly, Citron did go short on RIOT a few days AFTER that TV interview.
And Mr. Left is correct — on both counts.
Namaste!
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As far as using puts to be on the proper side of the RIOT mess. I would just caution being too sure of the timing. Valuations that don’t make any sense can persist for a long time in the market. But you’re right to avoid the direct short which has an unlimited downside. I completely agree this whole space is a hot mess… But if BTC pulled out of it’s current nose dive you might see a renewed interest in the inflation of the bubble and anything BTC related. Personally I think capping the downside by owning puts is the ideal away to play it. But puts come with a downside of being on the clock. I agree with your logic that this market cap doesn’t make sense. It’s not a matter of if the price starts to reflect the business but when. You might be right that RIOT is caught in a perfect storm of pesky things like reporting requirements and annual meetings etc. But as we’ve seen with KBIO/HGEN. Sometimes it takes longer than one would like for the writing on the wall to come to reflect in the stock price. Just my $.02 but I’m a Buffett value guy so I don’t play in this type of thing but it is certainly entertaining to watch.
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My puts are long dated. And more and more… the odor — of securities fraud… is what I smell, from Sixth Street in Castle Rock, Colorado.
I am decidedly feeling a Marty echo here… smile. Who all else did the company “compensate” with the $36 million PIPE, besides Canacord Genuity? And who got the $10 million “windfall” — when the company inexplicably bought blockchain/bitcoin mining boxes, at ten times’ retail value, as new machines, in its latest dumb “acquisition” move?
I wonder — was it a company formed only days earlier? Who are its beneficial owners? More disgruntled investors, from prior deals? I wonder… the full disclosure will come in the 10-K, not due until March.
And all that said, I do agree with all your background on valuations…
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The only other observation about this stock is: They have 9.5 million in float. Now that it’s market cap has popped (no matter if it’s deserved or not) it has to be picked up by the total market ETFs by Vanguard, Blackrock, Fidelity… That alone can support it for a little while. The latest quarterly info shows they own 200,000 shares (ish). But I’m sure that was before the main pop more recently in November. Also, who the hell owns the other 9 million shares? It doesn’t look like it’s well owned by the management. (Which as you’ve pointed out is usually a sign of something bad)
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I hear you… the idea that the company raised $36 million in a December PIPE (courtesy the SEC Form D, just filed) — and at a 50 per cent discount to current December values…
Has me thinking (a la Marty — at Retrophin), former investors in other ventures (there is very significant overlap on the names in RIOT, and the OTHER loser investment O’Rourke introduced them to) —
including that one allegedly backed by John McAfee… which is the subject of the federal suit I mentioned… are being “compensated” in some way — in the PIPE…
We shall see. I do agree with your observations, but the CEO’s sale of stock has me thinking about the dank odor of (alleged) securities frauds, as well.
Have a safe new year, man!
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I agree totally! Off now to party like it’s 1999 with some college buddies and spouses. Happy New Year to all!
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Enjoy!
Onward!
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