This is not investment advice. The author has no position in any of the stocks mentioned. Wccftech.com has a disclosure and ethics policy.
After his release from prison in May 2022, the disgraced former Pharma executive, Martin Shkreli, is not exactly keeping a low profile, with his controversial tweets continuing to rile the sentiment in stocks where the C-suite veteran has taken a bearish position. Now, the monkeypox vaccine manufacturer, SIGA Technologies (NASDAQ:SIGA), has become the latest target of Shkreli's roving eyes.
Last month, Martin Shkreli published his bearish thesis on AMC Entertainment, enraging the stock's bulls in the process. Soon thereafter, the former Pharma executive entered the blockchain space by launching the Druglike platform, which is based on the Martin Shkreli Inu (MSI) token. Basically, Druglike is a decentralized computation network that will be available for free to early-stage drug discovery projects. Powered by the MSI token, the platform aims to incentivize drug discovery solutions by using a Proof-of-Optimization framework.
all right short $SIGA after horrific stop loss incident. the FDA is telling you this isn't a serious disease, it self-resolves and doesn't require treatment.
— shkreli (@ShkreliRuleof5) July 29, 2022
This brings us to the crux of the matter. Martin Shkreli recently advised his Twitter followers to short SIGA Technologies, contending that the US FDA is unlikely to declare monkeypox a serious disease.
As a refresher, SIGA's Tecovirimat (TPOXX) was approved by the European Medicines Agency (EMA) in January 2022 for the treatment of smallpox, monkeypox, cowpox, and complications arising from smallpox inoculation.
For the uninitiated, the WHO has now declared monkeypox a global health emergency. While initially the disease was thought to be spreading through sexual contact, more recently, evidence has emerged that the monkeypox virus might be proliferating via airborne droplets. The WHO has also identified the case fatality ratio of between 3 and 6 percent in recent times, albeit with the qualifier that this is "a self-limited disease with the symptoms lasting from 2 to 4 weeks." SIGA's Tecovirimat is currently the best vaccine in the market to tackle this health issue.
The US FDA has already approved SIGA's Tecovirimat for the treatment of smallpox. Moreover, the CDC is allowing the "compassionate use" of this vaccine for monkeypox, pending formal approval from the FDA.
So, should you follow Martin Shkreli's advice on shorting SIGA Technologies shares? Well, the former Pharma executive is not exactly a pillar of upstanding conduct. After all, Shkreli had gained notoriety by jacking up the price of a life-saving drug by 5,000 percent. In 2017, he was jailed for two counts of securities fraud and one count of conspiracy to commit securities fraud after a federal jury found him guilty of lying to investors about the performance of his two hedge funds as well as skimming money from his drug company, Retrophin, to compensate for his hedge fund losses.
Consequently, given Shkreli's past misconduct, his public exhortation to short SIGA shares can't be interpreted as a piece of benign investment advice.
On the other hand, SIGA shares are up 124 percent so far this year, with most of these gains occurring since May 2022. A case could be made that the stock is overvalued, especially as much of its short-term bullish thesis depends on the monkeypox threat reclassification from the FDA.
If you are already long on SIGA, this might be the perfect time to add cheap, out-of-the-money put options as an insurance policy. If, however, you are still on the sidelines, the pain trade from here onwards is likely to be in the upward direction.