By: Abhishek Sahoo
So, for a flashback, let’s go to 2018. Moderna, the pharma startup, has its fair share of attention with the largest ever IPO by a biotech company, raising $604.3 Mn. But it had to see even better days moving ahead (or may be worse, let’s see).
(Well, pharma is it? Yay… nonetheless, it had portrayed itself as a tech company, with its chairman and CEO being engineers, and terming diseases as ‘killer apps’ and its first phase of research as ‘Moderna 1.0’)
Moderna was formed in late 2010 as LS18 Inc. and it carried out drug research and development based on mRNA. Although it’s dwarf-sized in comparison to its peers, it had no debts by December 2019 and a market cap to revenue ratio of 5 times its peers! Furthermore, it has an excellent collaboration with the US health officials. Moderna and the NIH workers began working on a vaccine to fight the virus in January. With its research mechanism in place, it was all set to be the first company to develop a vaccine against COVID-19. Well, until this, it seems perfectly fine. But then, what made it come into limelight recently? Well, let’s dive a bit.
On May 18th, the CEO comes on TV to woo investors with a narrative of a pre-clinical trial. He pitched the world declaring the first phase of trial of a supposed vaccine. Now, the interesting part is the sample size, just give it a guess? No? Its eight, just 8. (seriously!) Just imagine, how worthy is an eight participants’ worth of information conveyed through a press release? No scientific statement, no proofs, just words to create a false hope! Gross negligence? (or deliberate, may be!)
Well, but how does it relate to the stock market? Are you trying to figure out the relevance of the title? …ah, so the wait is over, the interesting scene begins now.
“A little hope will do the trick” -at a time when the globe is in turmoil, how would you feel when you hear that something can save 5 million people? …well, this just worked for Moderna. Following the press release, the buying spree made its stock surge nearly 20% to close at about $80 a share. It’s worth a mention that, a company with no products came to be valued at $30 Bn!
Post-market, the company announced $1.25 Bn public offering, despite having $1 Bn in cash and $500 Mn from BADRA funding. Also, good relation with the US health officials meant it could have asked for additional funds for this noble cause. But it chose the equity market! Well, something seems fishy, isn’t it? Wait, there is more.
White House vaccine advisor Slaoui openly backed Moderna. He was on Moderna’s board and held over 150,000 call options contracts in the company. Even the Director of NIAID backed Moderna. So, the stock was up 70% since the first week of May and now, let’s lift the veil!
Insiders were into a selling spree! Insider trading data shows that the CEO had been actively selling into the rally since the first week. Slaoui had sold $12 Mn worth of shares. Moderna’s biggest investor, Flagship Pioneering, was also selling. Nearly $30 Mn of stocks were dumped and the price plunged! Well, was this just a correlation, or a causation, as the facts state?
I leave it here for you, to judge and infer…
Nevertheless, let’s set the issue aside for now and just hope that the vaccine is soon discovered. Also, there is a clear indication of how the market would welcome the news. So, do not succumb to negativity. Let’s contribute our bit, stay home, stay safe.
Thank you for coming this long.