Gabriel Grego's recent warning about Cassava Sciences

If you've been reading my work for long, you'll know that I have great respect for activist short sellers...

In my July 3 e-mail, I made a full-throated defense of them, writing:

As I've argued in hundreds of my e-mails over the years, the stock market is filled with hype, fads, frauds, and plain old overvaluation. This leads to many wildly overvalued stocks – and huge losses for average investors duped into investing in them.

There are huge forces at work pushing stocks higher than they should be, led by company executives, who stand to make millions (if not billions) of dollars if their stocks go up a lot, even briefly and unsustainably.

They, in turn, are almost always cheered on by Wall Street "analysts" (I use that term loosely, as most simply parrot what companies tell them) and the media.

As I also explained, there isn't much protecting investors:

Regulators can't do anything about hype and overvaluation, just fraud – and are so outmanned and outgunned that they can only address a fraction of it (and even when they do, it's usually long after the stock has crashed).

So short sellers – especially those courageous enough to go public with their work – are a critical factor that can protect investors, as hundreds of examples and lots of academic research show.

Later in my e-mail, I cited "the latest example of the important role activist short sellers play"...

I discussed the work my friend Gabriel Grego of Quintessential Capital Management has done to expose suspicious activity at Cassava Sciences (SAVA), which claims to have a promising drug in the pipeline to treat Alzheimer's disease.

Despite recent crashes, the stock still sits at around $10 per share – giving it a roughly $500 million market cap.

I've written many times warning about Cassava. And at my Value Investing Seminar in Italy on July 5, Gabriel shared his latest findings and conclusion about the company. This slide from his presentation shows his overview:

Gabriel has found many examples of falsified research, which gives the incorrect impression that Cassava's drug shows promise in treating Alzheimer's:

He also believes the company has manipulated clinical trials to achieve the same end:

Gabriel released his first report on Cassava on November 3, 2021, which I covered here (the stock closed that day at $56.66). Now, even with the stock down so much, Gabriel has still been bearish. He continued his presentation by summarizing recent developments:

As Gabriel concluded, the "stock is a walking zero":

In summary, while I haven't done the primary research myself, I know the quality of Gabriel's work... So I have little doubt that his analyses and conclusions are correct. Avoid Cassava's stock.

And thank you, Gabriel, for granting me permission to share your presentation with my readers! (You can see the full presentation, with all 43 slides, here.)

Best regards,

Whitney

P.S. I welcome your feedback – send me an e-mail by clicking here.