Geron Looks Born to Run

Investors in Geron (GERN) -- the stock market's largest player in embryonic stem cell research -- could feel good long before the company discovers any miracle cures.

In the eyes of some, in fact, Geron seems to be dropping hints that it's doing well already. Experts point to two looming events, both set for June, as signs of a possible breakout.

First, Geron will follow through on a promise made months ago to establish the exercise price on 4.125 million warrants for its stock. The warrants, issued in December and February, will be priced based on the stock's value during a narrow trading window ending June 12. Holders can cash in those warrants, beginning June 13, by paying 120% of the average stock price during the previous five sessions, with an upper limit set at $12.14 a share.

Geron's stock, while lifted a week ago by exposure in a prominent Barron's article, fetches just $7.18 a share right now.

"Are those warrant holders keeping a lid on the price right now?" asks Robert Lawton, managing partner of New York's Catoosa Fund. "I can think of 4.125 million reasons why they might."

Lawton, for one, has never seen a company arrange to price warrants during a specific period months after their grant date. When questioned by TheStreet.com, Geron itself declined to explain the arrangement or identify who the warrant holders might be. Meanwhile, partly because of this odd scenario, Lawton's firm has invested heavily in Geron -- a biotechnology company that it likes anyway -- in anticipation of a quick return.

"I have seldom directed my firms to take significant long positions in the biotech sector," Lawton admits. But we "have found some significant success on those rare occasions when we have done so."