Sorrento Therapeutics’ (NASDAQ: SRNE) saying they have a COVID-19 treatment that offers a 100% protection, before conducting trials, was an incredibly bold statement. SRNE’s optimistic announcement not only lit the investment world alight but also pushed them into the legal spotlight. It is the possible lawsuit charges that caused the bears to multiply. However, SRNE surged yesterday and in pre-market today. It seems quite absurd for a biotech under the legal microscope to be bullish. Unless the people leaked news about the lawsuit. Let us tackle this investing dilemma today.
Table of contents 1. Update on the lawsuit 2. Why on Earth is SRNE up? 3. Breaking down investing in Sorrento?
Overview of SRNE’s COVID-19 lawsuit
Pomerantz LLP filed a class-action lawsuit against Sorrento Therapeutics in relation to alleged misleading COVID-19 data. The lawsuit covers investors who bought shares between the 15th to the 22nd of May 2020.
Pomerantz argues that Sorrento failed to disclose the following: (I) the company’s initial finding of “100% inhibition” in an in vitro virus infection will not necessarily translate to success or safety in vivo, or in person: (ii) the company’s finding was not a “cure” for COVID-19, and as a result SRNE’s positive statements were materially misleading.
Investors who purchased SRNE stock between the above dates have until the 27th July to be appointed as lead plantiff. The negative criticism towards SRNE began to compound as the stock fell 42% in 15 days.
Why are the bulls rallying behind SRNE?
With the lawsuit causing the bears to own chart, investors wonder why it SRNE suddenly up 20%. 8% from yesterday’s trading and 13% in pre-market today (at the time of writing). The answer is it is all speculation from face value. What we all know that Sorrento’s legal allegations are just that at the moment, allegations. Second, the coronavirus raging on COVID-19 biotechs is naturally going to experience more bulls around their camp.
Furthermore, the sudden insurgence of bulls could be because of news that has been leaked on either (a) another jaw-dropping announcement or (b) the lawsuit will unlikely fail. (opinion not advice). However, those reasons are a maybe. Whereas, alleged legal claims and the proliferation of COVID-19 is a definite.
SRNE already up 13% in pre-market – should you invest?
Before I start, I am obliged to remind our viewers that this is not advice only general commentary from my extensive research in this area.
Short answer: Potentially but the future could be a rollercoaster so plan an exit strategy
Investors who have not jumped on the SRNE bandwagon are probably sitting on the fence, which is understandable. On one side, you have a biotech branded with misleading statements, and on the other side, you have a stock in which the bulls own the chart. However, it seems the lawsuit’s negative sentiment is fading, especially as the deadline is a month away.
What are the facts – could be bullish from here on
In this market, it is best to be objective and push emotions aside. So the facts are SRNE is tackling COVID-19 via neutrasling antibodies. SRNE completed the manufacturing and FDA documentation preparation a few weeks ago, which was announced on the Jim Crammer show. Sorrento needs the green light from the FDA to begin trials, and the stock could be catapulted into a new all-time high (opinion not advice). Thus, there could be potential to ride the hype or wave of Sorrento in the coming weeks. However, if you decide to invest in SRNE, make sure it reflects your investing needs and not the needs of financial institutions.
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The information above is not financial advice. Youth Investment Group has no liability for personal financial interests or investment decisions. You should make your own investment decisions based upon your own research and what you believe is best for you.
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Written by Patrick McLoughlin, Senior Manager of YIG.