Saturday, May 26, 2012

"K-V Pharmaceutical Company States That Its Policy is Not to Comment on Unusual Market Activity"

On Friday afternoon, KV Pharma put out a press release because of the insane rally (ending +35% on the day).

"K-V Pharmaceutical Company (the "Company") (NYSE: KVa/KVb) today announced that in view of the unusual market activity in the Company's common stock, the NYSE has contacted the Company in accordance with its usual practice. K-V's policy is not to comment on unusual market activity."
The bonds were unchanged, 59 cents and 17 cents for the sub notes, which supports the view that the rally was caused by daytraders (i.e. worthless stock inefficiency). One would think that if the company's prospects had significantly improved, there would be significant trading activity / appreciation in the notes that will have a 6x return by the put date next year if the company is able to redeem them.

I've come up with the idea in the past that the more volatile a stock price is, the less likely it is to be worth anything. A search of tweets about KV shows that daytraders with insights such as "we got a runner boys" and "dolla holla" were buyers on Friday. Presumably they had not checked the bond prices.


eahilf said...

Presumably they had not checked the bond prices.

They most probably don't know that the company has outstanding debt. And wouldn't care or know what to do with that knowledge if they did.

CP said...

Well, of course. That is the point of the worthless stock inefficiency.