Thanks to CraigDoc, who was the first to figure out what apparently went on with PN. He wrote:
Could it have something to do with the warrants related to CEO selling shares…it seems as if the warrant holders profit from the lowest price between Feb 1, 2016 and 9 March 2016 (10 trading days after earnings release).
Holders of certain warrants apparently had the right to exercise those warrants (buy shares of stock) at the lowest price the stock hit between Feb 1st and March 9th. They therefore sold short the stocks they were going to get (and more as well) to get the best possible price, by pushing the price down, and succeeded quite well. Undoubtedly some regular stockholders got scared and sold too, which helped the warrant-holders to push the price down.
Last Wednesday they got it down to $3.65, and apparently gave up. It closed yesterday (just three trading days later) at $4.97, up 36.2% from the low in three days. That’s a bunch in three days and means that there’s no more point in warrant-holders selling any more shares short. They’ll never see a lower price than $3.65 by the 9th of March, which is tomorrow.
There’s good news and bad news in what happened. The bad news would be if the exercise of the warrants represented dilution at a cheap price. (However, if it’s just the CEO’s shares they are buying, it doesn’t change the share count, and doesn’t cause any dilution).
The good news is that there was nothing wrong fundamentally pushing the price down, it was a manipulation of the price that warrant-holders could exercise the warrants at. The other good news is that it was actually an amazing opportunity for us (as I stated in my earlier post).
What happened last Thursday to break the back of this manipulation at $3.65? Well, the CEO (and the company) apparently got fed up and said enough is enough, and announced a share repurchase, effective immediately.
Okay, How did this work? Why would someone sell 5,000 or 10,000 shares of stock last Wednesday at $3.70 to establish the low price at $3.65, when they know that the price is probably going right back up?
I haven’t looked up how many warrants there are, but say you are a hedge fund or two, with the right to exercise warrants to buy a million shares at that lowest price, would you care about selling 10,000 shares at that price? It’s 1% of the million shares that you will be able to buy at $3.65 when you exercise your warrants, and the stock is already worth 36% more three days later. You expect to sell your shares eventually at $7 or $8 or $10 or more. Interesting manipulation for them, isn’t it? (A million shares is less than 4% of the total share count, so that isn’t a ridiculous number to consider).
Note that it was a sure thing for them. They didn’t have to worry about buying back the shares they sold short at $5.00 and $4.50 and $4.00 and $3.75, etc to drive the price down. They get the shares to cover at the lowest price it hits (which was $3.65)! They couldn’t miss.
It was also great for us as well as we had the opportunity to buy at a cheap price too, without all the work of pushing the price down.
I hope this helped.
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