By Malcolm Berko
Dear Mr. Berko:
A stockbroker I know has been trying to get me to invest, but I keep telling him that I’m a single mother with two children and don’t make enough teaching school to put money in a stock.
But last January, he told me of this company called Medivation that was $37 per stock share and had developed a cure for Alzheimer’s disease. He said it would make billions and eventually be bought out by Pfizer at more than $100 per stock share. He said the drug was called Dimebon and that the test results were secret, but that Dimebon would become the largest-selling drug in the world. He was so enthusiastic, certain, knowledgeable and insistent that I cashed in my children’s savings bonds to buy 200 stock shares at $35.
Several days later, it was selling at $38, and he was very excited and told me I could do a margin transaction. I didn’t have to put up any more money, but had to use my stock shares as collateral so I could buy another 200 shock shares. I bought more at $38.70 on March 2, and the next day, Medivation went down to $14. Then I had to sell everything; now I have nothing left, and I owe the broker money.
Please tell me what happened, if there is any way I can get my money back and if I should talk to an attorney. I’m sick about this and lost a week of work because I was so shell-shocked. I’ve even lost 6 pounds, which is a lot of weight for me. Can you help?
R.S., Indianapolis
Dear R.S.:
I would like to make a brief commentary on that broker’s parentage, his future and his personal habits. However, good manners plus the God-fearing readers of this newspaper would forbid it. But perhaps in his next reincarnation, let’s hope he comes back as a dung beetle.
But R.S., as much as you would like to blame someone else (refusing to take responsibility for failure seems to be an American trait), please recognize that you were complicit, too. I understand how badly you feel, but he couldn’t have bought that stock without your permission. You signed the papers, you wrote a check and you gave it to him. You let your greed exceed your common sense. So you both share the blame; though, if it makes you feel better, I’ll place the onus on him.
Medivation (MDVN – $13) is a biopharmaceutical company that develops small-molecule drugs for the treatment of Alzheimer’s and several other pernicious diseases. Your brokester was waxing eloquently about the unprecedented results from Phase 11 trials of Dimebon as a possible Alzheimer’s cure. The Phase 11 results were so spectacular that Pfizer invested $225 million in cash in MDVN and got 60 percent of future profits.
Well, last year, Dimebon entered Phase 111 trials, and investors were hanging on tenterhooks waiting for results. Then BOOM, the detritus hit the fan. MDVN announced that Phase 111 trials were an ignominious failure, and the stock crashed like a rock from a high Alp, wiping out more than a billion dollars in shareholder value in just one day. And you lost nearly 24 points or $9,600.
Hiring an attorney is a waste of time. Your loss is too small, and even the scrofulous ambulance chasers won’t waste time for such a niggardly amount of money. So I had a pleasant conversation with the manager of the brokerage where you bought those shares. He agreed that (1) You did not sign a margin form and (2) that MDVN was an unsuitable investment for you. Now you have your children’s money back and a real-life experience equivalent to an MBA in finance.
If there are some riverboat gamblers out there, they might consider Elan (ELN – $5.95), an Irish biopharmaceutical that has two Alzheimer’s drugs in clinical trials, ELND005 and ELND006. Results are expected in the next 16 months, and Pfizer has a lot of bucks invested here, too. And I guarantee ELN will not drop 2 points — but R.S., you stay away.
Please address your financial questions to Malcolm Berko, P.O. Box 8303, Largo, FL 33775 or e-mail him at mjberko@yahoo.com. Visit Creators Syndicate Web site at www.creators.com. © 2010 Creators Syndicate Inc.
