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Ligand Down 20% Since August 1; What's The Street Thinking?

Ligand Down 20% Since August 1; What's The Street Thinking? - Ligand Pharmaceuticals Incorporated NASDAQ:LGND

Ligand Pharmaceuticals Inc. LGND hit a 52-week high of $139.79 at the beginning of August. Since then, the stock has been steadily declining and as of Wednesday was trading for less than $109 per share.

The stock is now nearly flat since the start of 2016, but still higher by more than 11 percent over the past year. There has been no notable company specific news to explain the stock's reversal over the past two weeks and the sell-side community has been mostly bullish in their ratings with one exception.

Analysts at Deutsche Bank downgraded Ligand to Sell on August 5.

Prior Deutsche's downgrade, analysts at Roth Capital reiterated a Buy rating and $147 price target. On April 13, analysts at Stephens initiated the stock with an Overweight rating and $150 price target. Back in March, analysts at HC Wainwright initiated coverage of the stock with a Buy rating and $146 price target.

Investors and traders could be reacting to Deutsche Bank's recent recommendation, but it may be important to recall a hedge fund's short thesis against the company.

Rev. Emmanuel Lemelson, a hedge fund manager at Lemelson Capital Management, has been short the stock as of June 2015.

Speaking to PreMarket Prep on June 7, 2015, the fund manager said Ligand is essentially a "pyramid scheme of shell companies" and its complex business model will be used as a case study into the "excesses of the stock market."

He added that Ligand is making use of "extraordinary financial engineering," especially when considering it's a company with just 18 employees.

"That's the kind of thing you want to short," said Lemelson. "It's just not sustainable."

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