Pro Perspectives 12/14/20

December 14, 2020

State electoral votes are being cast today. 

And the Pfizer vaccine is being distributed.

Yet stocks finish down on the day.  Pfizer, finishes down almost 5%. 

But for Pfizer shareholders, this must just be profit taking, right? 

Not exactly.  If you were a Pfizer shareholder in late January, before it was known that latest coronavirus would become a global pandemic, you have made exactly nothing on your investment by the close of business today, despite having held shares in the first company in the world to inject a vaccine into the arm of a patient. 

dec 14 pfe

On that note, if you bought Gilead at the close on April 29, the day Fauci called Giliead’s new drug Remdesivir the new “standard of care” for treating covid, you  would be down 28% on your investment.  

So, despite winning the race, the shareholders of these giant drugmakers weren’t winners.  The real winners in the vaccine race were the tiny biotech companies that received 10-figure gifts from the federal government to pursue a vaccine. 

This is what happens to a stock when inject $1.6 billion dollars into an $18 million revenue company.  The market cap of NVAX has gone from $700 million to almost $8 billion …

dec 14 nvax 2

Moderna did $60 million in revenue in 2019.  The government gave them a billion dollars.  The market cap has gone from $6 billion to $61 billion. 

dec 14 mod

The lesson:  When government money is being deployed in stimulus or emergency aid, the big winners are the small early-stage companies.  This was also clear in the Great Financial Crisis (ex. Tesla).