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Be careful what you wish for…

Last Friday, when Immtech International (IMM) filed its 10-Q, I noticed a long list of unusual transactions where the company was giving away stock to various other companies who were hired to get the stock more attention, including getting it listed on a major stock exchange. It worked, but probably not in the way that Immtech imagined. In August, the company was listed on AMEX and its shares quickly shot up. But in the past week, the stock has dropped about 50 percent, much of it yesterday, though it continues to fall today. Immtech is blaming short-sellers for driving the price down. Clearly, the shorts are at work here for the stock to fall so fast. But so too are the facts: general and adminstrative expenses increased more than 7-fold in the quarter ended Sept. 30. The bulk of that was due to stock options given to the companies working to promote Immtech. One other thing to keep in mind: as I note in Chapter 2, a University of Chicago study shows that investors need to be wary when a company declares public war on short-sellers. It’s almost never a positive sign for investors.