Exicure Inc (NASDAQ: XCUR) stock is up 30% premarket on reconsideration of the restructuring plans. The stock price at Exicure dropped over 40% yesterday as the plan was announced – the rise today is likely a more reasoned overnight consideration of what is actually planned.
Exicure has been having something of a disaster just recently, let’s not beat around the bush here. The company found out that Dr. Corbett, their head of neuroscience research, had been reporting incorrect – well, made up – results. This included material that went to the FDA which is one of those no nos for a pharmaceutical research company.
Exicure’s results should have been released back in November and then they found out, internally, that the researcher had been less than open with the truth. This led to a delay in being able to release those results – the stock fell over 20% on just the announcement of the delay.
Then came the actual results on Nov 19 and they were bad. EPS missed expectations by 17 cents a share which led to another downgrade of the Exicure stock price. Then on Monday, the company released the results of its own investigation into events. There’s a management reshuffle, the researcher with the light attitude to scientific facts has gone.
Exicure has also entirely ceased research into the line of drugs that the errors and misstatements concerned. The stock dropped again, falling by over 40% yesterday.
Now there’s this 30% rise in the Exicure stock premarket this morning. What’s going on?
It’s not as if they’re out of the woods after all. As is usual in such episodes the securities lawyers are searching for a class to act for. At least four different law firms are seeking those who lost money over this to create that class action.
Clearly there is already great volatility in the Exicure stock price – the volatility that is the opportunity for traders. The question is, well, what’s going to happen next? For that’s the thing to know to be able to position to take advantage of it.
One possibility is that this is merely a dead cat bounce. This is from the observation that if you drop anything – even a dead cat – from high enough then it will bounce at least once. So, stock prices that seem to crater often do leap off the bottom even if only to subside once again.
On the other hand Exicure might have dealt with the actual problem. They’ve got rid of the problem employee, closed down the investigation line affected, paid down some debt. They’ve still got a development program, maybe the firm is actually undervalued at this point? Even the lawyers, well, it’ll all take time and it’ll likely be the insurers that bear any costs anyway.
The opportunity is in working out which is the correct explanation and being positioned to take advantage of it.
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Tim Worstall is a freelance writer specialising in economics and the financial markets.