Axovant Sciences (AXON) stock went public yesterday, and boy, was it a show. The AXON IPO raised $315 million and shares finished at $29.90, a 99% gain from its $15/per share IPO price.
The answer is simple: absolutely nothing. AXON stock is plainly and simply a ripoff, and investors should steer clear of this company — or sell if they’ve already bought in.
Let’s take a brief gander at a few of the scorch-your-eyes-out glaring problems with the Axovant stock price.
Axovant’s 29-Year-Old CEO: Former Rapper/Hedge Fund Manager
Yes, you read that correctly. Axovant’s CEO, Vivek Ramaswamy, is 29. Also, Eminem’s “Lose Yourself” is his self-proclaimed life theme song and he sometimes raps under his alter ego, “Da Vek.”
So if you’re worried about Ramaswamy’s ability to run a $2 billion company focused on treating Alzheimer’s, don’t worry: Da Vek has it in check. A 2006 Harvard Crimson article chronicled the CEO’s lyrical side:
“‘It’s the most shocking transformation someone will ever undergo’ says Michael B. Chow ’07 of Ramaswamy’s rapper alter-ego. Though ‘Da Vek’ raps libertarian prose with the utmost of ease, don’t expect to see him in section. The rapper, who fearlessly showed off his skills at the Busta Rhymes concert in spring 2004, only emerges when Ramaswamy is outfitted entirely in black, complete with a black Kangol hat. ‘They’re two completely different people,’ says Chow.”
Ramaswamy goes on to say he wishes he’d been a “little more tactful” with the course of his undergraduate career. I have a feeling the future of AXON stock will provide shareholders ample opportunity for similar regrets in the future.
A former hedge funder and current nepotist, Ramaswamy’s mother and brother have received a combined 1 million stock options at an exercise price of 90 cents per share. The AXON stock price, at yesterday’s close, would give those options a value of $29 million.
Of course, the young CEO is quick to defend his move, reminding the public that they’re “both physicians by training,” and that one of them has been treating patients with Alzheimer’s disease for a few decades. Translation: They obviously deserve tens of millions of dollars in perks.
In another questionable move, early hedge fund backers of the AXON IPO, RA Capital and Visium Assetm Management, were given 90-day lockup periods, half the typical 180-day window most stocks require.
No History. No Sales. No Problem!
Enough about the blatant red flags thrown off by Axovant’s rapper/CEO. The company is a joke with or without “Da Vek” at the helm, regardless of how bonkers AXON stock went yesterday. Here’s a brief rundown of what you need to know:
Ramaswamy left QVT Financial, Daniel Gold’s hedge fund, last year to found a company called Roivant, which QVT helped to back. Then he spun off Axovant in October. In December — seven months ago — Axovant bought the rights to an Alzheimer’s pill, RVT-101, from GlaxoSmithKline (GSK) for $5 million. If the drug ever sells, GSK will receive a 12.5% royalty as well as certain sales-related milestones.
It is Axovant’s only drug candidate, aimed at treating dementia caused by Alzheimer’s. It has no sales to date — because it’s only just entering Phase 3 trials.
In a nutshell a bet on AXON stock is a bet against the expertise of GlaxoSmithKline, one of the largest pharmaceutical companies in the world, with a research and development budget topping $3.1 billion last year.
Say what you will about the libertarian prose of “Da Vek” — the rhyme-spitter has found his niche in the boardroom of wildly overvalued biotech companies: He’s also the chairman of Tekmira Pharmaceuticals (TKMR), a company studying treatments for Ebola and Hepatitis B.
TKMR stock is not profitable and trades for more than 50 times sales. I wouldn’t put my money in that one, either.
As of this writing, John Divine did not hold a position in any of the aforementioned securities. You can follow him on Twitter at @divinebizkid or email him at firstname.lastname@example.org.
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