Halts for Biotech companies

Your stock has just halted. Why?

A halt suspends trading of a security

Top 2 most common reasons for halts:

  1. Imminent news release that has material impact over the stock price

  2. Volatility - trading with too much movement that is considered abnormal

You can find out if your stock is halted from this link

If verified that your stock is halted, you will see a reason code as shown from the picture below. Here are the list of codes and their definitions to help you understand

For Biotech companies, they usually have imminent news releases that will impact the stock price greatly. After the news has been released, the reason code will change from T1 to T3. Keep in mind each situation is different, so you may see a T12 which means that there is more information requested by the Nasdaq before unhalting the stock. Once the T3 has been updated on the Nasdaq Trading Halt their will be a resumption time and the trading can commence. Halts allow everyone to have a fair chance to decide whether to buy or sell the underlying equity after the news has been released on a company.

In this example, they stock price was halted after the market closed on a Friday and is currently still halted until all of the material information is released to the public. This is a way to help investors digest the news from the company. In this case, Aurinia Pharmaceuticals which announced that their oral drug for Lupus Nephritis was approved by the FDA. The current price of the stock is $15 and could go to $40 per share after the halt is lifted. This is because their market capitalization which is currently at 1.79 Billion can be increased due to the certainty of the sales of the drug which could make around 1.5 to 3 Billion a year, plus they have the proprietary rights to this drug out to 2037. This means they could potentially make a forward earnings of 48 Billion. Buyout from another company over the weekend is a high possibility due to this factor which could send the stock price to 1/10 of the future earnings. Around 4.8 Billion, This would increase the share price from $15 to around $40 per share. Wow!

For each biotech company, the news release situation is different. Sometimes the stock can be halted for 5 minutes, or in like this example, over the whole weekend.

The reason why a company would still be halted after disseminating a press release is that they may have more material information that could be shared. This could include being bought out by another company, or having information about drug pricing that they did not include in their press release. It is important that you do your research on the company's individual situation. Aurinia Pharmaceuticals in this case as of writing this post, could be with holding more information from a potential buyout partner that would buy them upon approval of the FDA. They have the weekend to work the deal and then announce it on Monday.

On Monday we shall see what happens after Aurinia Pharmaceuticals finish releasing anymore information that could have material impact on the stock price.

I hope this helps you in your investing journey,

Brad Mitchell


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