Saturday, February 6, 2016

Some Preliminary Thoughts -- On What Might Come From The KaloBios Bankruptcy

There is no public listing of the creditors -- on file in the bankruptcy courts, yet -- and the investors who bought KaloBios common stock in the most recent $8.2 million private placement (which closed the day before Mr. Shkreli was arrested) are all suing for the return of their funds (so they too will be creditors of the bankruptcy estate). That makes it very hard to say -- at this early stage -- how it will all turn out.

I will add to this in due course, it will be a work in progress for a bit.

That said, I think it highly likely that none of Mr. Shkreli's equity interest in KaloBios will survive the bankruptcy. That is, he will almost certainly no longer hold even a small bit of the stock, as KaloBios exits bankruptcy protection some 15 to 20 months from now.

If it exits, at all.

I say this because Mr. Shkreli's current KaloBios equity will be the source of the return of the investors' funds, in the securities suits -- if there is any value in those shares. [This assumes he receives those same shares back -- from the pledge he made of them, in order to make bail, on the criminal matters (seven felony counts) in the federal District court, in Brooklyn. And who knows whether his new criminal lawyers have a claim to the bail securities, as well -- to secure their fees. Even so, I expect the shares will be released in time by the federal courts.]

To the extent that there is any value in Mr. Shkreli's hands after that, it will almost certainly be reorganized, and transferred to unpaid creditors of KaloBios. But I honestly don't expect there will be much left, even if KaloBios is able to close this still very tenuous Chagas neglected tropical disease (and FDA priority voucher) deal with Savant. I'll be able to flesh that out with actual figures, once we see the list of creditors in the bankruptcy filings. But we do already know that several universities are large creditors -- owed millions for running clinical trials for KaloBios -- and they will be in line to collect in the bankruptcy court, too.

So -- as I say -- this is mostly a placeholder, for now. I will also say that any other assets (the $2 million Wu Tang recording included, here) Mr. Shkreli holds at present, will be used to satisfy the Retrophin securities plaintiffs, and the earlier hedge fund plaintiffs, assuming they win at trial in the civil matters. He is almost certainly broke -- it is all over but the shouting, now -- he just doesn't know it yet. Minor update, here. G'night one and all. . .

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