Has Biocept Reached an Inflection Point?

However, the taper that we have seen in Thursday’s trading session begs the question of whether Biocept has reached an inflection point for the stock. If we look back just a few weeks we can get a better view of the full picture.

Biocept had a secondary offering on February 9, and compared to current prices it would appear that someone made a killing from it. The offering consisted of 8 million shares of common stock and warrants to purchase up to an aggregate of 8 million in common stock.

The common stock was offered at the price of $1.25 and the warrants had an exercise price of $1.56. Perhaps the big kicker was that those warrants could be exercised immediately, with an expiration date of five years from the date of issuance, which allows the financing investors to profit massively in a short time.

On the February 13 settlement date, short interest for Biocept spiked to 124,083 with one day to cover. The previous reading in late January was 60,280 shares with 1.2 days to cover. The highest reading before this was 19,384 in June. This may all be tied to that offering with the warrants.

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Following this combined Biocept stock and warrant offering, its shares dropped as low as $1.09.

What happened was that investors bought the shares and warrants from this offering, while some of those investors may have simultaneously or nearly simultaneously shorted the stock. This would have allowed investors to hedge their bets, whether they expected that shares would either go up or down following the offering. The result of hedging at the offering price was receiving warrants to buy the stock at $1.56 virtually for free, minus a few percent or so depending on their sale price and timing.

Since that, shares rose and rose on the news from earlier this week. Investors in the secondary could not have known for sure that great news was imminent, even if they hoped for a recovery in the weeks or months ahead. Biocept shares went as high as $4.91 just this week alone. At this point, or over the past two days, it seems like a pretty safe assumption that many investors might have exited those warrants.

As a result of this selling, shares of Biocept were down 22% at $3.70 in the last hour of trading Thursday. The stock has a consensus analyst price target of $13.50 and a 52-week trading range of $1.09 to $9.70.

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In the past few days Biocept has moved:

• Monday, February 23: 21 million shares
• Tuesday, February 24: 33.8 million shares
• Thursday, February 25: 45.6 million shares

Over 12 million shares had moved Thursday with just under an hour until the closing bell. If there was a combined volume of 90 million shares or so up until the bull-bear battleground began to form on Wednesday and the sell-off took place on the lowest number of shares, one has to wonder if the buyers just finally reached an inflection point — or capitulation point. At a minimum, an obvious breather has been seen here, even if the stock can recover again.

It may also be worth noting that Biocept named March 9 as its earnings date. Stay tuned.