Port Erin Biopharma (PEBI) listed on Thursday on AIM. It is the first time I have agreed to be a director of an AIM listed company but the idea of co-investing with Jim Mellon in biotech floats my boat so I agreed to come on board.
Amazingly we had managed to raise £3 million while the world fell apart in July and August and with Jim and I ready to make the first investments all seemed set fair.
And on day 1 the shares, placed at 10p, closed at 11.625p. I thought that was a decent result a good AIM debut for Port Erin and for me. On day 2 (Friday) one investor who had written a cheque for £100,000 less than two weeks ago dumped his entire holding with a market maker at 8.75p. Most of those shares have since been taken up by punters sniffing a bargain but still the share price conked.
Now, I ask you, what prompts someone to sign up only, two weeks later, to take a 12.5% hit just like that? Nothing has changed for Port Erin in that we have not invested a cent yet although that day will come soon enough. I know who the (institutional) seller was but I shall spare his blushes as I do not wish to intrude on private grief. Such a call can only be driven by insanity ( an irrational fear which drives one to sell out at or around net cash levels because you are just freaked out by wider concerns) or desperation ( an urgent need for cash to cover losses elsewhere). I do not know the state of this institution’s book and so can only speculate as to whether the manager in question is desperate or insane. Time will tell.
But of course PEBI is not the only stock out there to take a whack as a result of some irrational selling at a price which is way below fair value. That is what happens when you have had a bad couple of months on the market. It is hard to be dispassionate when you see all around you panicking or being forced to sell or, indeed, if you yourself are a forced seller. If you are not a forced seller then there are bargains to be had. But it takes a fair amount of bravery.