MSNBC – When Icagen went public in February, the company drew interest from a relatively new breed of investors: hedge funds.
Several of these investment firms, including Chapel Hill-based Silverback Asset Management, bought shares of the Durham-based biotech, quickly becoming its single largest investor group.
As of Sept. 30, nine hedge funds owned more than 11 percent of the company’s shares, more than the combined tally of mutual funds and banks, according to Lionshares.com, a Web site that tracks shareholder data.
“Certainly in terms of IPOs, (hedge funds) have been active,” says Richard Katz, Icagen’s chief financial officer.
Hedge funds are loosely regulated investment pools that make money by betting on the movement of a company’s publicly traded shares and debt. Unlike mutual funds, they sometimes take short positions – betting share prices will fall – and search for arbitrage opportunities within a company’s financial instruments.
Hedge funds have grown in number and size over the past few years and are filling a gap in funding for companies, especially smaller cap biotechnology outfits that cannot attract the interest of mutual funds. Smaller biotechs are perceived as risky bets that demand a deep understanding of their science.
