Sorrento Therapeutics (NASDAQ:SRNE) stock is trending on social media today, with SRNE stock up 8% at one point this morning. This climb came after shares soared roughly 25% yesterday, although SRNE is now in the red. Why are shares on the move?
Sorrento, a clinical-stage biopharma company, filed for bankruptcy last month because it lost a lawsuit. However, some retail investors have since become fascinated with SRNE stock following the bankruptcy. Yesterday, a bankruptcy court also approved a $75 million cash infusion into Sorrento.
Here’s what investors should know moving forward.
What’s Happening With SRNE Stock?
Yesterday, a U.S. bankruptcy court granted interim approval of Sorrento’s $75 million of “debtor-in-possession financing.” The company received the funds from JMB Capital Partners, a California-based hedge fund whose “parent fund” is Smithwood Advisers. The latter fund reportedly has $2.64 billion of assets under management.
According to Sorrento, the funds will enable the company to keep operating as its bankruptcy proceedings continue.
Sorrento was forced to declare bankruptcy after another court upheld a decision by an arbitrator. The arbitrator ruled that Sorrento was at fault after a yearslong dispute with two companies called NantCell and NANTibody. The arbitrator awarded $156.8 million to NantCell and $16.68 million to NANTibody, plus 9% annual interest until the award is paid off. Because it feared that these companies would seek to seize its assets in the wake of the judgment, Sorrento declared bankruptcy.
What’s Next?
When companies prepare to file or do file for bankruptcy, their shares can soar and then subsequently tumble. For example, on Jan. 31, Reuters reported that Bed Bath and Beyond (NASDAQ:BBBY) was preparing to file for bankruptcy. BBBY stock — which previously closed at $2.87 on Jan. 30 — closed at $5.86 on Feb. 6. However, by Feb. 8, the stock was back down to the $2.60 level. Yesterday, BBBY stock closed at $1.64 per share.
Investors who have bought SRNE stock or are interested in doing so should be aware that Sorrento could undergo a similar phenomenon.
On the date of publication, Larry Ramer did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
