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Intercept's share price jumped from 33 to 38 today, apparently because the company was able to price their follow on offering at the market value of 33. I've seen stocks rise before after announcing dilution would come at market value, the mirror image of the plunge seen when the new shares are sold below market. The street interprets this as a vote of confidence by the book runners and their clients who will be buying the new shares.First of all, it seems to me a fallacy that book runners and their clients are the ultimate arbiters of a company's long-term value. One only has to look at the business decisions of companies like Citibank to see they're just as fallible as any other players in the market. Banks, brokerages, and bookrunners make their profits on arbitrage and commissions rather than on stock speculation. And if forcing a discounted secondary tanks the share price, the discount immediately becomes moot. It seems in this case, bookrunners were smarter to buy at market value and then get a huge headstart on profits from the street's overreaction to it.Regardless of the pricing of the secondary, Intercept seems overvalued to me at these levels for reasons I've described previously. Intercept is developing obeticholic acid as a second-line therapy in primary biliary sclerosis for patients who have failed treatment with the standard of care ursodiol. There's no SPA for the trial, the trial endpoints do not seem to me to be rock solid, and topline data isn't expected until Q2 2014 at the earliest. There's no reason for the stock to be so volatile a year ahead of the next significant catalyst except for the desire of traders to use it as a football.
IBD EPS, RS, SPROE, Acc ratings plus P/E and div yieldMEDICAL 4 99 DA, NO EARNINGS
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