Why Did CytoDyn CEO Sell His Shares?

Beat Billions, three days ago, uncovered the potential sale of CYDY stock by the company CEO, Nader Pourhassan. At the time, many investors were confused about the Form 144 that was used by the company to file this with the SEC, and we provided some clear guidance on how to interpret the data in this form. You can read this all here.

Now that the sale of CYDY by the CEO has made it to the market, investors are actively trying to interpret what this means to investors and the future stock price performance of the company. There are two schools of opinion on this.

  1. The CEO selling nearly half of his stake in the company is a sure sign that the company will fail spectacularly in the coming months.
  2. The CEO sold his stake to pay for Samsung and keep the compnay alive. He is a savior and took a loss himself to help investors reap the rewards.

At Beat Billions, we believe neither is true! What is true, however, is that CYDY CEO is acting as a professional investor. Let’s find out why.

“Without showing any data” claim by Adam Feuerstein might not be true

On May 4, STAT featured an analysis by Adam criticizing CYDY CEO for his recent actions. In this report you can find here, Adam pointed out the fact that the CEO has been converting his options to common shares and selling them in the market and making millions of dollars while encouraging investors to bet on the shares of the company. This criticism, in our view, is spot on. Actions speak louder than words, and Nader certainly must adhere to that rule.

What we do not agree on, however, is the claim by STAT that CYDY has not provided any data. In a press release dated May 6, CYDY confirmed that a pre-print of its research on leronlimab’s success on treating critically ill Covid-19 patients has been sent for peer review. A copy of the full manuscript has been sent to the World Health Organization as well. You can read the full manuscript here.

The below is an excerpt from the press release that confirms STAT’s claim on “no data” is not true.

As described in the pre-print, in a cohort of ten critically ill patients, after treatment with leronlimab, these critically ill patients experienced reversed hyper immune activation and inflammation, as well as reversed immunosuppression, thereby facilitating a more effective immune response correlated with decreases in SARS-CoV-2 level in blood.

This is a pre-print and has to be reviewed carefully. However, at the same time, saying CytoDyn has no data to show does not seem like a valid claim.

Going by this data, we can rebuke the thesis that Nader sold half his ownership because he knows the company will not be successful. There is data to believe the company can, indeed, become successful. Unlike some other biotech companies, CytoDyn has made some actual progress in fighting Covid-19, which certainly deserves some credit.

CytoDyn CEO’s reasoning does not make sense

Now let’s get to the ugly part. According to the data we have, Nader claims he exercised his options to give much-needed cash to the company to pay Samsung. This, according to him and the CYDY bulls, has saved the company from eventual collapse. Should we thank him? No!

If the real intention was to raise much-needed cash for a payment, CytoDyn could have simply sold more shares. Either way, it would have diluted existing shareholders, and the company could have ended up with more money. CytoDyn CEO’s claims do not add up at all! Also, what is the last time you heard a company executive “sacrificing” his gains to reward retail investors? Never, we believe! Do we have enough reason to believe Nader did this for the first time in corporate America’s history? No, we do not.

Investors need to remind themselves that the company had an easy and a more profitable way out to pay Samsung or any vendor; sell shares! The company chose a more difficult path, which happens to be a path that rewards the CEO in millions as well.

What exactly happened, then?

Beat Billions is dedicated to finding answers to these types of questions about small-cap stocks. According to what we believe, CytoDyn’s CEO acted as a professional investor would.

CYDY stock has gained by more than 200% YTD. If CYDY is successful in finding a cure to curb the spread of Covid-19 (which we hope they do!), the stock price will most definitely skyrocket. At the same time, there’s a very real possibility of the company failing to find such a cure as well! Before questioning whether CYDY can fail, investors need to get out of their “bull” and “bear” mindset and leave their personal biases aside. CYDY can fail, it can succeed too.

The CEO knows this better than us all! That, we believe, is the primary reason he decided to exercise his warrants to raise some cash for the company, while it was entirely possible to do this more cost-effectively. Doing this, the CEO has now netted millions of dollars in profit.

Beat Billions believes that this is exactly what a professional investor would do with CYDY stock. The future is very uncertain. Many of the positive developments have already been factored in. Shares could go higher or lower from now on. So why not sell half of the stake and book the profits? Nader, as we now know, agrees!

Our take on CYDY stock is similar to Nader’s take (not his words, but his actions)! We believe now is not the time to be investing in CYDY. The directional movement of the share price will depend on CytoDyn’s success, which is something the CEO does not have any clue on, going by his actions. As investors, we do not want to be risking our capital with such a stock.

Stay tuned with Beat Billions for more on CYDY as and when the company makes some progress on its trials.

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