Clarus Therapeutics (NASDAQ: CRXT) stock has jumped near 100% in the last 24 hours. From some 85 cents a share yesterday, to 99 cents at the close and another 60 odd cents this morning to a near 100% rise. What is going on here at CRXT?
It would be fair to surmise that this isn’t about some grand reappraisal of business prospects at Clarus. Despite the fact that they’re in the androgens space – which given trans issues is that much more popular – they’re in the treatment space for hypogonadism. That is, not for those elective treatments.
Their latest annual results, the 10K, don’t show that they’re in a good place either. Annual losses were around the $40 million mark – and this is with a product out there and on sale. They’ve $26 million or so in cash and cash equivalents, they’ve 6 months to go before they run out of money.
Well, yes, although obviously, they have been selling stock – financing activities brought in $60 million and change last year.
What is going to hurt though, is that they’ve only been on the market since September and that arrival was at $7 and change. A nearly 90% fall in the price since then is going to make any new issuance painful for the existing stockholder base.
Which brings us to the technical issues, not the strategic ones, which need to be discussed with Clarus (note that this is Clarus Therapeutics, not Clarus Corporation, and entirely different kettle of piscines). The annual results came out on March 30, the 10k available on the 31st. The, how to put this, not very good position of the company was known by then. This would then be good reason why when Cantor released its listing of short positions across the market, it found that Clarus had had a 10x rise in those short positions against it.
Well, why not? A company not doing well, requiring a grand refinancing at the very least, why not short it?
Well, the answer could be that if there’s some even small reversal – as we saw at GameStop, at AMC – then seven a slightly rising price can lead to a scramble to cover short positions. Thus the shorts themselves create the conditions for a possible jump upwards in the share price. There needs to be a trigger of course, but sometimes there is just that.
Here at Clarus, the trigger seems to be that they’ve announced a stock issue. The point of which is that they’ve managed to get it underwritten. Which means that they will raise the cash and so survive for that longer period. So, that short bet doesn’t look quite so sure now.
As to what happens next at Clarus well, that depends really upon how well they market their treatment in this extra lifespan the stock issuance buys them.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.