Notorious Drug CEO Making Enemies in Stock Market
Martin Shkreli accused of 'rampant share price manipulation'
By John Johnson,  Newser Staff
Posted Dec 1, 2015 6:00 PM CST
Activists hold signs with the image of Turing Pharmaceuticals CEO Martin Shkreli in front the building that houses Turing's offices in New York in this file photo.   (AP Photo/Craig Ruttle)

(Newser) – The drug company CEO that everyone loves to hate is back in the news again for making enemies. This time, however, Martin Shkreli is not accused of jacking up the price of a drug. Instead, critics says he's engaged in market manipulation in the biotech industry. Or as Forbes contributor Jay Somaney puts it, "rampant share price manipulation." The accusations revolve around a California company called KaloBios Pharmaceuticals that was on the verge of going under last month. After it announced it was winding down operations, an investment group led by Shkreli swooped in and acquired 70% of it. The stock soared 4,000% in less than a week, recounts Gawker—and this is where the situation gets a little wonky because it involves short-sellers and something called a "short squeeze." The short-sellers got hosed when the last-second rescue turned their expected profits on the demise of the company into big losses.

"Some market observers see signs of a deliberate short squeeze, in which short-sellers are forced to buy frenetically to limit their losses," writes Michael Hiltzik at the Los Angeles Times. Shkreli then made another surprise move by abruptly announcing that he would stop lending shares of the company to a second wave of short-sellers who had gotten in the game to bet against the stock—another "short squeeze," as the Wall Street Journal headline put it. The price soared again. A sign of the craziness: One guy on E-Trade went from $33,000 in profit to $106,000 in debt in two days, prompting him to open a GoFundMe account (now closed) asking for help, reports Zero Hedge. (He made about $5,000, notes MarketWatch.) Shkreli insists it's all aboveboard. "This was a company on death's door and it was rescued by a well-known investor," he tells Hiltzik. "Would you expect it to go down?" But Somaney, for one, calls what happened the "mother of all short squeezes" and thinks the SEC should investigate. "For a stock to go from pennies to almost $50 per share (in less than two weeks)" makes no sense, he writes.
 

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