How High Could the Stock Price of Gritstone Bio Go?

Alright, folks, it’s time to get real. $GRTS is up more than 100% since the BARDA contract was announced. At the time the company was worth about $120 million. Then they got a $433 million dollar contract, and everyone was like, okay, hold on, what in the flying monkey is that all about? How can a tiny company that appears to be trending towards dilution at all-time lows get so much money from Captain America?

Here's what the daily chart looks like.

HULK SMASH

Look me in the eye and tell me that isn’t the most glorious chart in the history of charts. Have you ever seen such strength coming off a news release? Such volume? The potential price movement on this stock is absolutely bananas.

Here’s what’s up.

In 2020, Moderna got a similar contract from BARDA to develop a Covid-19 vaccine. At the time their market cap was $9 billion. BILLION. Even after rallying more than 100%, Gritstone still only has a market cap of $228M.

Gritstone’s share price has been absolutely massacred in the five years. It went from a high of $28 to a low of $1.14.

Gritstone is presenting what is likely to be spectacular data at ID week. They will be showcasing the 12-month antibody data for Gritstone’s next-gen Covid-19 vaccine.

The six-month data showed that the antibodies were still doing their antibody stuff. As you may know, while current mRNA vaccines offer strong protection against severe forms of the disease in the long term. But our protection against milder forms wanes after a few months as antibody levels drop. Which is why you keep hearing the mouth-breathing Neanderthals complaining about catching Covid even after getting the vaccine. Because the antibodies went out for cigarettes and they never came back.

BARDA has likely seen the 12-month data. This data likely shows that the antibodies are still around. Otherwise, why would BARDA give them the money to run a 10,000 person Phase 2/b study? That’s $43,000 per person. BARDA likes Gritstone, and by extension the US Government likes Gritstone. Gritstone has the backing the most powerful entity on the planet that does not fuck around when it comes to winning.

The FDA approval process has become highly unpredictable in the past decade. The FDA can and does hold a grudge. You’ve heard of Gilead? Well, they got into a spat with the FDA over some HIV patents and then whoops their drug for rheumatoid arthritis got denied approval for sperm count reasons. Rheumatoid arthritis is a disease that mostly affects old people and is 2-3x more likely to affect women. So, it makes sense to issue a CRL for sperm count reasons. Right?? Right???

Excuse me while my eyeballs roll out of my head.

What I’m saying to you is this:

If the government is funding your drug, and the FDA likes your drug, your drug is not going to get stabbed in a back alley like Filgotinib was. (RIP $GLPG.)

Gritstone has traded almost 52M shares since the BARDA contract was announced. Have you investigated who holds this company? How many outstanding shares they have? This stock is hilariously unavailable, which is why it’s been rocketing 20% a day. There are only 93M outstanding shares. Insiders and institutions own about 60% of those 93M shares. That means, before the massive buying spree that’s been going on, there are only about 37M shares up for grabs for the small investor.

It's already traded 52M shares and the 12-month antibody data isn’t even out. Once the data is out then news organizations can report on it. They can talk about it on MSNBC. The CEO can do interviews and be like, “Yeah, we have the best-in-class next-gen Covid-19 vaccine. Who wants to touch me?”

Then it’s goodbye share price. Today the stock closed at $2.45. Which means in the eyes of most organizations it’s still a penny stock. It can’t trend on Stocktwits. Most mutual funds can’t buy it. And even some people with registered retirement accounts can’t buy it.

Once this stock crosses $5 you’re going to see some serious shit.

And this is all just based on Gritstone’s Covid-19 CORAL program. They’ve got a ton of other stuff in the pipeline. If there was ever a stock that was a long-term hold, it’s this one. Don’t watch the 1-minute chart, you will go insane. Wall Street has been running stop-loss raids on this one every few hours since the BARDA contract was announced. They’ll run up the price and then nuke it by 7-15%. This is to flush out the day traders and band waggoners. Institutions with deep pockets are trying to accumulate as much as they possibly can.

Just look at the options market.

There’s basically no liquidity there when there should be a ton.

Here’s a crash course on Market makers.

Market makers are financial institutions or individuals who commit to buying and selling financial instruments (like stocks or options) to ensure that the market remains liquid. They quote both a buy and a sell price, aiming to profit from the bid-ask spread.

Role in Options Market: For the options market, specifically, market makers play a crucial role. Options can be complex and might not have as much natural volume or interest as directly trading stocks. This can lead to situations where it's hard for a regular investor to buy or sell an option due to lack of other participants.

Why for Obscure Small Stocks: Even for obscure or small-cap stocks, there's a need to have a functional options market for several reasons:

1. Liquidity: Market makers ensure there's always a buyer or seller. This liquidity makes it easier for investors to enter or exit positions.

2.  Price Discovery: With active market making, the options prices better reflect the true value or sentiment related to that stock.

3.  Hedging: Investors might want to hedge their positions even in small stocks. Options provide a way to manage risk, and having an active options market helps investors do so.

4.  Institutional Interest: Sometimes, institutional investors might be interested in specific small-cap stocks and would require options to hedge or structure their portfolios.

5.  Attracting More Participation: A functional options market can make a stock more attractive to a broader range of investors, potentially leading to more capital flowing into that stock.

In essence, while the options market for small and obscure stocks might not be as active as for large-cap ones, market makers ensure that when investors want to participate, they can do so smoothly and efficiently.

Now, pull up your stock trading app and look at the volume on the options. It’s basically non-existent. Why? Because the market makers aren’t filling any orders that aren’t at the (seemingly) overpriced ask.

Take a look at the $5 calls that expire on October 20th. 183 out of the 205 contracts traded today was me. I’ve been testing the options market for the last few days. If it was any other stock, they would be worthless. I bought 182 of those at 5 cents. And then Mr. Market Maker decided he didn’t want to sell them anymore at 5 cents, and jacked the price to 10 cents, so I bought one for the lols.

Here’s how options usually work. Let’s say the bid on an option is $1 and the ask is $1.20. (Options usually have much larger spreads than normal equities.) On pretty much any other stock in existence, if you were to try and buy at $1.20, you would get filled by an algorithmic trader at less than that. Maybe $1.10. Maybe lower. Option orders placed at the ask rarely fill at the ask. It’s almost always an odd number, like $1.18 or $1.08.

Over the last few days, I’ve been buying options at multiple strikes with different expiries. Pretty much every single one was filled at the ask. The only times they weren’t filled at the ask was when the spread was so ridiculous large that to buy at those prices means you would have to either have brain damage or be laundering money. For instance, at one point today, the asking price for the $2.50 May 2024 calls was $5. That's double the cost of simply buying the stock, which doesn't have an expiration date.

Market makers do not want to sell you these Gritstone options. Market makers HAVE to sell you these options. If people start piling into the options, as “overpriced” as they may appear to be, then whoever is writing these options is going to miss out on a lot of money when this stock rockets past the strike price.

They have to make a market for you. In exchange for stealing billions from the public every year, market makers have to create to liquidity which means they have to offer to buy securities and they have to offer to sell securities, even when it means they’re gonna lose money. (In the short term.)

Ask yourself, “How can a stock that with a free float of only 37M shares that is up more than 100% in a few days on near 52M in volume, have such a dead options market?”

The answer is: The options are being priced higher than normal so that you don’t buy them. Wall Street doesn’t want you to buy them. They don’t want you anywhere near Gritstone. That’s why they massacred the stock to all-time lows before the BARDA contract was announced. What they want is, is for you to look at the options market, think “Fuck that, I’ll just buy the stock,” then buy the stock, and get stopped out, or scalp it for 15%.

Because if the 12-month antibody data is good, and again, why wouldn’t it be if the US government invested $433 million dollars in it, then this stock is going to the proverbial moon.

A $2B market cap for this thing would be at the lower end of where it should be.  Remember, Moderna had a market cap of $9B when it got a similar BARDA contract. True, that was during the pandemic when the need for a Covid-19 vaccine was highest, so let’s say it’s half of that. $4.5B for Gritstone Bio as a reasonable valuation given their partnerships with the ultimate financier and largest dick on the world stage, the US government.

Conversative price target: $50. When? I don’t know. Maybe in a few months.

I think we could easily see $5 in the next few weeks, maybe as early as tomorrow.

Think of it like musical chairs and the floor is made of lava. There’s only 37M chairs available and 55M of them have already been traded. What’s left to sit on? I have no idea. But you don’t want to be left standing in the magma when the music stops.

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