Dendreon's Mysterious Trade

Posted by: Ben Levisohn on April 29, 2009

Biotech stocks are supposed to be volatile, but yesterday’s move in Dendreon (DNDN) was a bit much. In a matter of minutes, the biotech stock fell 70%, from 25 to 7.50, before trading was halted at 11.81. The truly strange part: the company was expected to announce the results of tests on its prostate cancer drug at 2pm, about half-an-hour after the selling started (most stocks have large moves after the news is announced). Even rarer, is the speed with which the move happened, just a little over one minute for the stock to fall 16 points. Even more amazing is just how wrong the seller turned out to be.

What is clear is that someone, maybe more than one person, desperately wanted to get out of the stock. Dendreon shares started drifting lower at 1:24, but the drifting turned to hardcore selling around at 1:25:32. An offer to sell 20,000 – large in a stock that typically trades a few million shares a day, though volume would spike to over 30 million – appeared on the tape at 24, and the stock started falling like a rock. Bids were hit — Bloomberg reported that 260,000 shares or 60% of the volume traded at the best-buy price, a sign that an someone really wanted to sell. Eleven seconds later, the Dendreon shares were at 23. Twenty-five seconds later it was trading 20, as the pace of the selling picked up. Blocks of shares continued to trade – 2,000 shares, 5,000 shares – as the stock continued to plummet, with our seller still trying to dump 20,000 shares. Twenty seconds later the stock was trading at 12, and yet it continued to fall. Only after the stock traded 7.50 about 17 seconds later, did shares bottom. In all, it took one minute and 13 seconds for Dendreon’s market cap to fall over 16 points.

NASDAQ halted trading in the stock moments later, with the stock at 11.81. Results of the clinical tests were announced about half-an-hour later. And they were good. Better than good. Late-stage prostate cancer suffers live 4.1 months longer on Provenge, Dendreon said. Serious side-effects occurred 24% of the time, similar to the 23.8% rate with a placebo. FDA approval is expected by 2010 and Dendreon stands to make billions from the drug. On April 29, four analysts upgraded the stock to buy, two to outperform. When trading reopened the next day, the first trade went off at 26.82.

So what happened? What caused Dendreon shares to hit terminal velocity? NASDAQ looked into the trades, suspecting that perhaps they were entered by mistake, in which case they would be cancelled. NASDAQ let them stand. We can rule out a trader hitting the wrong button. Some bloggers speculate it was a bear raid, a group of investors selling a large quantity of shares to push the shares down – though they would have had to cover before the halt to make any money on the trade. Perhaps it was a “Trading Places” situation, where someone thought he had news and just kept selling. Or maybe it really is as simple as the rumor now making its way around Wall Street: a trader had simply misinterpreted a headline and pushed the sell button, causing a cascade of selling by itchy-fingered traders, nervous from the pending announcement.

Whatever it was, even with the stock closing at 22.94 anyone who sold near the lows is nursing a very large loss.

Reader Comments

justwondering

April 29, 2009 5:19 PM

Or could it have been this?...a Yahoo DNDN message board post that appeared an hour before the raid, warning there was going to be a raid: He said 12:30 Central Time which would be 1:30 EST

Copy of post from Yahoo board...
HIGH PROBABILITY MASSIVE BEAR RAID 12 30 pm central today 28-Apr-09 11:22 am DNDN could easily drop 50 % on a massive bear raid its coming.. today @ 12 30 pm central


Sentiment : Strong Sell
Rating :
(36 Ratings)

r.v.midd m.d.

April 29, 2009 5:51 PM

it's very obvious that what happened was no accident. my suspicion is that big pharmaceutical co's with billions of dollars invested in traditional chemotherapeutical drugs will try everything in their power to keep this new, safe and efficacious therapy from coming to fruition because they stand to lose a ton, when it is found that this immunotherapy for cancer can also work for every other cancer(without the extreme side effects). This bear raid was used to try and scare everyone from continuing the upward momentum that the stock was experiencing. my thoughts only.

Fred L. Sliva

April 29, 2009 6:24 PM

I purchased DNDN Monday, and again Tuesday (4/28 a.m.) in anticipation of good news from Dendreon. I was watching the stock carefully and revised my stop/limit sell order several times as the stock went higher. I was extremely fortunate that I saw the stock start to dive and was able to cancel my sell order before it activated. Would have lost about $20K if sell had completed. I imagine many investors got injured as I almost did.

Fred Sliva

D.Smith

April 29, 2009 7:31 PM

What's even worse about this situation is that @ 4:30 I called NASDAQ Customer service and asked what was going on with the shares and will the orders stand. They said yes, I later informed them that after hours trading had resumed and only 20,000 shares had been purchased, they responded with no the stock has still been halted. (SO DNDN went from 11 to 23 dollars in seconds, I wish one of they news outlets would do some hard research and actually find out what happened rather tht reading the NASDAQs post or one anothers articles to get info.

JRJ

April 29, 2009 7:38 PM

My opinion it was done on purpose to create panic. Today it actually traded down most of the day.
Before the planned sell-off it was over $24, and it closed today below $23. If the sell-off didn't happen and create panic. DNDN would likely be above $30. People, we invest our hard earned $$$ with crooks, flat out crooks and manipulators. I have been investing (gambling) in the market for 15 years. If the Big Boys want a stock lower to cover their shorts, it WILL go lower. BANK ON IT !

Randy

April 29, 2009 7:52 PM

It really doesn't matter at this point. Anyone who placed stops on a high risk speculative company such as DNDN, risked getting taken out and possibly even taken out much lower then their stop price set.

Furthermore, if I hadn't had my scottrade streaming quote entry already set to sell at market in the event the news popped DNDN above the day high of 25, I would of never got out at $24.16 per share.

I heard the CEO on CNBC talking about a home run etc. So as soon as I got taken out, I entered a market order to buy back my shares as soon as I saw single digits.

I was amazed at how fast it dipped below 10, hit 7.50 and didn't even fill my market order until $11.49 per share.

I sold those shares in After Hours shortly after the trading halt was lifted for a huge profit.

Never seen anything like this in my 15 years as a trader and probably never will again. Hell, had I gone to the restroom, I wouldn't of made a plug nickle off the amazing crash.

Randy

Kelly H

April 29, 2009 9:23 PM

How about this.....crooks conspired to steal shares from responsible investors who had implemented stop-losses in their DNDN stock.

The manipulators conspired to bring the pps down just as the halt was set to begin. The market-makers are privy to when the stock will halt and can see the stop-losses listed in the queue. So shares were shorted, most likely naked, in order to drive the price down just enough to cause the stop-losses to hit, then more was shorted at the same time even more stop-losses were triggered, causing a domino effect to manipulate the pps. Crooks covered some shorts at the bottom. Then the stock halted and DNDN closed at $11 and change, down 45% on release of excellent data never before seen in a trial of advanced stage PC patients.

But hey, the stock rose 100% the day after the news from $11 to $22. Seems like the price would be higher since DNDN closed at $22 and around 20% of Dendreon's float is sold short and many big players thought the trial would fail. Yep, one would guess that the STELLAR results would have produced quite a pop.

Oh, well, rich crooked conspirators fleece Main Street once again. It's the American Way!

kel

Bill

April 29, 2009 10:15 PM

It seems funny that on a day when so many shares traded prior to this "event", many in larger blocks, that this occurs just before release of the DNDN results of the Impact study. Why doesn't Nasdaq release the detailed information on the trades that occurred just prior to and after this event for the public to view. It seems that Nasdaq would rather ignore the possibilities and forget that many investors lost out on a great investment.

Bill

April 29, 2009 10:15 PM

It seems funny that on a day when so many shares traded prior to this "event", many in larger blocks, that this occurs just before release of the DNDN results of the Impact study. Why doesn't Nasdaq release the detailed information on the trades that occurred just prior to and after this event for the public to view. It seems that Nasdaq would rather ignore the possibilities and forget that many investors lost out on a great investment.

K G

April 29, 2009 10:25 PM

There is definetly something fishy.
The people who really made a lot of money are the option market makers for DNDN. As today both the out of the money options (calls & Puts for May) dropped almost 90% in value.

KG

JoeDallas

April 29, 2009 11:28 PM

Someone shorted the stocks, while spreading rumors of a downfall at an expansive scale and then bought those very same stocks at cheap prices only to see them go up significantly within hours. Not a bad day for a hard earned cash! I only wish It was me, so I could finally build my dream castle in Preston Hollow, Dallas Texas.

goodguy

May 2, 2009 12:21 AM

Kelly H. has scored a direct hit IMHO. Lets see who made those trades that kicked off the stops. Should the market makers have a full view of the queue like that? Reminds me of card counting--isn't that illegal?

BDog

May 4, 2009 9:29 PM

I got an idea, why doesn't Nasdaq, as a securities dealer, actually publish a specific and detailed written response with a timeline explaining exactly what happened to restore a little bit of faith and confidence with Joe Public.

Their lack of disclosure and arrogance "no appeals allowed" is pathetic.

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Bloomberg Businessweek’s Ben Steverman focuses on the latest moves in financial markets and emerging trends in stocks, bonds, and funds, always with an eye toward giving readers a better understanding of the sometimes confusing and often chaotic world of money. Standard & Poor’s senior index analyst Howard Silverblatt will also provide his take on companies’ finances and the markets. Voted one of the “Top 100 Finance Blogs” in 2007.

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