Selling Biovail Short

Name: Selling Biovail Short (English version)
SKU: 207071

Baker, Malcolm P.; Lombardi, Christopher J.; Sesia, Aldo

Product #:207071

Supplier:Harvard Business School

Discipline:Finance

Setting:Canada, 2006

Details:Case (PDF) • 14 pages • 2006-11-07

Subjects:

Behavioral finance Financial markets Investment management Finance and investing Economics Finance and investing

Geography:

Canada North America

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$11.64

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Hedge fund SAC Capital and analysts from Gradient Analytics and Banc of America face charges of stock price manipulation from Biovail, a Canadian pharmaceutical company. Gradient and BofA produced negative reports on Biovail's earnings quality. At the same time, SAC built a large short position in the stock. The defendants must consider specific and general strategic responses to these allegations.

Learning Objectives

To give students the opportunity to evaluate the mechanics and the costs of short selling, including commissions, rebate, locating shares, the risk of recall, and the risk of litigation and public scrutiny. Class discussion can include the asset pricing implications when short selling is difficult.