I am going to write a few blog posts about $AVEO today. This one is about why I'm not going long over the weekend, and no longer am looking to trade it this afternoon.

For reference, I started writing this post at 2PM EST, before the short squeeze happened that sent the stock from $2.67 to $2.75.

I was originally planning to, as I spent the whole day watching it and studying it, preparing plans for trading as I'll write about in another blog post, but then I had a revelation.

So, what changed? I just realized I was overlooking something I usually pay attention to right away on NASDAQ stocks. I've noticed this pattern across similar stocks the past few months at times, but I totally overlooked it for the entirety of my time watching $AVEO.

To put simply: Nasdaq’s Minimum Bid Price Requirement

As I was sitting here this afternoon, I was thinking about how I need to change the way I approach trading. I was looking at how much $AVEO is up now, and was thinking if it would be a good overnight hold or not over the weekend. The first influential factor for me with these types of stocks, is what is the probability of an offering?

Then, I glanced back at the yearly chart and realized, today is the 10th consecutive trading day above $1, and I'm certain this stock was in delisting danger.

Sure enough, it is: https://www.sec.gov/Archives/edgar/data/1325879/000119312517120555/d363190d8k.htm

On April 11, 2017, AVEO Pharmaceuticals, Inc. (the “Company”) received a letter from the Listing Qualifications Department of the Nasdaq Stock Market (the “Nasdaq”), approving the transfer of the listing of the Company’s common stock from the Nasdaq Global Select Market to the Nasdaq Capital Market. This transfer will be effective at the opening of business on April 13, 2017. The Nasdaq Capital Market operates in substantially the same manner as the Nasdaq Global Select Market, and listed companies must meet certain financial requirements and comply with Nasdaq’s corporate governance requirements. The Company’s common stock will continue to trade under the symbol “AVEO.” As previously reported on a Current Report on Form 8-K filed with the Securities and Exchange Commission on October 14, 2016, on October 11, 2016 the Company received a deficiency letter from the Listing Qualifications Department of Nasdaq notifying the Company that, for the last 30 consecutive business days, the bid price for the Company’s common stock had closed below the minimum $1.00 per share requirement for continued inclusion on the Nasdaq Global Select Market pursuant to the Nasdaq Listing Rules (the “Bid Price Rule”). In accordance with Nasdaq Listing Rule 5810(c)(3)(A) (the “Compliance Period Rule”), the Company was provided an initial period of 180 calendar days to regain compliance with the Bid Price Rule. Following the transfer of its listing, the Company has been granted an additional 180-day period, or until October 9, 2017 (the “Compliance Date”), to regain compliance with Bid Price Rule. If, at any time before the Compliance Date, the bid price for the Company’s common stock closes at $1.00 or more for a minimum of 10 consecutive business days as required under the Compliance Period Rule, the Staff will provide written notification to the Company that it complies with the Bid Price Rule, unless the Staff exercises its discretion to extend this 10 day period pursuant to Nasdaq Listing Rule 5810(c)(3)(F).

Why is this important? Because the easy way to fix delisting issues is to reverse split your stock, but that requires shareholder approval. When was the shareholder meeting? June 21st as described by the filed SEC docs: https://www.sec.gov/Archives/edgar/data/1325879/000119312517143340/d290669ddef14a.htm

To approve an amendment to our Restated Certificate of Incorporation to increase the number of authorized shares of our common stock from 200,000,000 to 250,000,000; ... To approve an amendment to our Restated Certificate of Incorporation to effect a reverse stock split of our common stock, by a ratio of not less than 1-for-3 and not more than 1-for-15, such ratio and the implementation and timing of such reverse stock split to be determined in the discretion of our board of directors; and

If you check the last filed 8-K, you'd see the reverse split was approved, as well as the issuance of more shares: https://www.sec.gov/Archives/edgar/data/1325879/000119312517214935/d368772d8k.htm

This means the company is in a rather nice position. They have a R/S in their pocket now to prevent delisting, but they they won't have to use it presumably because the stock price is going to close above $1 today.

In addition, their stock price is "much higher" than before, so if they wanted to do an offering that fits into the newly allocated share increase, they could get much more compared to before the recent runup on "good news".

Does the company need to raise more money? According to the last 10-Q, yes - https://www.sec.gov/Archives/edgar/data/1325879/000119312517157164/d375100d10q.htm

... Based upon the Company’s approximate $33.4 million in existing cash and cash equivalents as of March 31, 2017, the Company does not have sufficient cash on hand to support operations for at least the next twelve months from the date of filing this Quarterly Report on Form 10-Q. Furthermore, in order to maintain compliance with the financial covenant under its Loan Agreement with Hercules, the Company will need to maintain $10.0 million in unrestricted cash until the completion of the TIVO-3 trial, with results that are satisfactory to Hercules. These conditions raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date these financial statements are issued. ...

More good reading in that "Liquidity and Going Concern" section as well, standard stuff for these types of companies, but nonetheless, important to know and understand.

All this together brought me to form these simple conclusions:
- I think an offering is coming soon while the "iron is hot" and the company can get a lot more money now than they last did with an offering.
- The cancellation of the delisting is meaningful in assuming no offering before the end of today's close (although this revelation is a tad late now). In addition, once satisfied at the close today, they get a fresh slate and at least another 6 months if it happens again.
- The authorized R/S in the pocket of the company means any unfortunate price action within the occurrence of the next delisting notice means there's nothing to worry about anymore for them in not being able to R/S if they need to.

Because of this, I do not want to be holding over the weekend, nor be looking to trade it anytime soon again because there's too much potential downside I could get trapped in, even with a well formed trading plan. Likewise, while I am not a short biased person, I would not be wanting to short into a possible news spike + delisting cancel notice either.

That's it for this post, please remember these are all my thoughts and opinions. Happy trading!