Saturday, January 18, 2014

SIGA: Why Change Perspective Now?

A few people have written in to ask why I chose this moment to reverse my sentiment on SIGA. Was there some trigger?

No, there wasn't a trigger. In fact, the absense of triggers was my biggest problem with this investment.

For years, SIGA faced a series of nightmarish adversities and adversaries - all unrelated to their perfectly safe and effective cure for the scariest of bio-terror threats. It was clearly an investment to sit on until things worked themselves out. So I grew accustomed, over the years, to stoically waiting.

As I learned from my experience running Chowhound (which slogged for years), it can be devilishly hard, amid a long grind, to find an apt "let go" point. Stoic slogging is a steady state that, by definition, lacks dramatic triggers. This makes it surprisingly easy to ride a stock all the way down to zero. It doesn't feel like a plummet; it feels like a lobster feels in a very gradually heated pot of water. At first you feel sleepy, then, before you know it, you're cooked.

Grinds never offer clear break-away points. You just hope you'll notice when you reach a time where you no longer ought to stick around. It's tough because that moment passes silently!

In SIGA's case, I freshly considered the cumulative effects of all the factors, and I fully digested the import of the November quarterly report where they announced the dismantling of R&D and their intention to be acquired. And, most importantly, it dawned on me that, so long as FDA remained stalled (making foreign orders unlikely), the long-promised follow-up contract was absolutely everything.

Distracted by other factors, I hadn't fully realized how significant it was that, two years later, this contract had failed to materialize. In light of the political forces at work, I registered it as fatal. With this in mind, it makes sense for SIGA to have put itself on the selling block.

If there had been obvious interest by big pharma in the two months since, it might have been worth holding on for the acquisition boost. But I've heard nada. And I can no longer justify holding on. For the first time, I can see a possibility that the stock could eventually grind down to zero. And as disappointed as I am at $3.70 (with a stock that climbed above $15 a couple years ago), it's a helluva lot better than zero. Hence my exit.


phil4433 said...

Looking at their latest 10Q they have $162 Million in long term deferred liabilities. Do you know what that represents?

Jim Leff said...

phil, this is sort of an epilog posting. I'll reply beneath the previous posting, which was more about details and specifics. Join me there.

Blog Archive