Why Is Opko Falling?

The shares of Opko Health (OPK) have taken unexpected plunge of approximately 3.6% since November 21, following the tweet that Lakewood Capital Management has initiated a short position in the company's shares. The news caused a spur and resulted in heavy selling which caused the share prices to fall as much as 6.5% during trading hours, on November 21.

The News

In the Robin Hood Conference's Best Ideas segment Anthony Bozzo of Lakewood Capital, presented a short thesis on Opko. He views that the shares of Opko have a 75-100% downside to it, implying a price target of zero. He further suggested that Opko is a little more than a day trading vehicle nowadays. This caused major speculations regarding the company and the shares began to slip.

The market sentiment following this position has been negative, as there is major speculation regarding the reason that caused Mr. Bozzo to suggest what he did, since Lakewood previously had a long position on the shares. The shares however, did rally yesterday during trading hours following a bullish article on the situation, but it didn't have enough momentum to continue till closing. All this in spite of the continued stock purchases by the CEO, is indeed confusing for the investors. However, the company does have a 51.18% of insider holding and 12.20% of institutional holdings, which include George Soros of Soros Fund Management LLC, Mario Gabelli of GAMCO investors, among others.

Bottom Line

Opko Health is a company with potential owing to its candidates and catalysts in the near future. The company also has sound cash position and has revenue generators, and to top it all off is an effective management. Furthermore, the company's current mean price target is $11.67, with a high of $14.50 and a low of $9.00 and a current price of $9.92 as on November 25. The analysts rate the stock a Strong Buy.

The short position disclosed and the subsequent fall in the share prices in my opinion is a temporary rough patch and will soon subside. Any news that could rally the prices would result in the shorts covering their position and this would push the prices upward, which is the most probable turn of events in the foreseeable future. Additionally, Dr. Frost, the CEO of the company, has continually purchased shares on the open market, which is another positive factor and should help maintain the investor trust.

Overall, I believe the market did over react regarding the news and the company still has a bright future. The most important thing for investors should be the continued belief of insiders in its potential. I believe the shares will rise again and the current decline is another low entry point for long term investors. For my other, more detailed, reports on Opko please click here.

Source: Why Is Opko Falling?

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article. (More...)

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