Goldman Sachs faces backlash from Helixmith investors
Goldman Sachs has drawn a severe backlash from Helixmith and individual investors, after it flipflopped on its outlook for the Korean biopharmaceutical firm, dragging down its target price sharply, according to industry officials, Monday.
Small investors here suspect that the U.S.-based multinational investment bank’s change in outlook was aimed at conducting short selling, which bets on a drop in a company’s stock price.
A high-ranking executive at a local securities firm, who asked for anonymity, said such a drastic change was suspicious enough to raise questions about short selling, citing a previous plunge in Celltrion shares after Goldman and Morgan Stanley issued negative reports about the biopharmaceutical firm.
“I’m not sure foreign firms are under as strict supervision by the financial authorities as domestic firms are,” he said.
Short selling is an investment method in stock trading where investors sell stocks they don’t own.
The short sellers borrow the stocks to return them later to the lender by repurchasing the same stocks. They use this method in a bear market, as they can make profits by repurchasing shares at prices lower than the prices at which they sold them.
In a report published Oct. 5, Goldman analyst Kim Sang-soo said the company was downgrading Helixmith to “Sell” from “Buy” and reduced its 12-month target price by 74 percent to 64,000 won ($54), citing new risk factors it observed in the Phase 3-1 clinical trials of Engensis, or VM202, a DNA plasmid gene therapy for diabetic peripheral neuropathy.
The investment bank lowered its estimation of the probability of the trials’ success in its forecast to 22 percent from 60 percent.
Kim remained on “Buy,” when the Korean firm suffered a plunge in its stock price in September after a Phase 3 trial failure because of a methodology mistake that saw placebo patients also being given the test drug.
Helixmith’s stock price, which had been on a downward spiral since then, began to recover Oct. 7 after it announced that the safety and efficacy of Engensis had been proven in Phase 3-1B trials.
Goldman’s latest report, however, pulled its stock price down to 89,800 won last Wednesday from 105,600 won Tuesday.
Helixmith’s shares also dropped Thursday, closing at 82,400 won.
The biopharmaceutical company fought back against Goldman in an interview with its CEO published a few hours after Thursday’s close.
“I admit there had been insufficient oversight of our contract research organization as Goldman said, but I do not agree with the estimate of a lower probability of success,” Kim Sun-young was quoted as saying in the Korea Economic Daily.