Zafgen’s stock tumbled as much as 11.5 percent on Monday after hedge fund Kerrisdale Capital said it has a short bet on the biopharmaceutical company’s stock, arguing that U.S. regulators will not approve the sale of its obesity drug.
“Zafgen’s deadly obesity drug (beloranib) has no reasonable chance of FDA approval,” the hedge fund wrote in an 11-page report issued on Monday, adding that Zafgen’s stock is worth only $3 a share. It was down 6.7 percent to $8.25 in late morning trading on Monday.
Kerrisdale, which manages about $400 million, has made a splash with bets against big-name companies and is one of only a small number of hedge funds to publicly disclose its short positions, in which the stock is borrowed and sold with the expectation it will fall and be bought back at a lower price.
