Sonnet's (SONN) 53% Plunge: A Strategic Shift or Market Panic?

Summary
• Sonnet BioTherapeutics (SONN) plunges 53.38% to $1.445, erasing $1.66 from its opening price
• Stockholder approval for a transformative business combination with Hyperliquid Strategies and Rorschach I LLC triggers massive intraday volatility
• Turnover surges to 6.04 million shares, with price oscillating between $1.40 and $3.23

Today’s seismic move in Sonnet’s stock price underscores the high-stakes gamble of its strategic pivot. The company’s approval of a business combination with two private entities has ignited a polarized market reaction, with investors grappling to assess the implications of this structural overhaul. The stock’s collapse from $3.16 to $1.40 within hours highlights the fragility of market sentiment in the face of uncertain strategic repositioning.

Strategic Rebranding Sparks Investor Uncertainty
Sonnet’s stockholder approval of its business combination with Hyperliquid Strategies Inc. (HSI) and Rorschach I LLC marks a procedural victory but has triggered a sharp selloff. The transaction, detailed in HSI’s Form S-4 registration statement, represents a fundamental shift from Sonnet’s existing oncology-focused biotech platform to an undefined new business model. While regulatory hurdles have been cleared, the lack of clarity around the post-merger entity’s operational strategy, revenue streams, or therapeutic pipeline has left investors in limbo. The FHAB platform’s unproven commercial viability and the company’s history of capital-raising struggles further amplify risk perception, prompting a flight to safety.

Bearish Technicals and a Void in Options: Navigating the Volatility
• 200-day MA: $3.01 (well below current price)
• RSI: 36.82 (oversold territory)
• MACD: -0.21 (bearish divergence)
• Bollinger Bands: Price at lower band ($3.12), signaling potential rebound resistance

The technical landscape for SONN is dire, with all major indicators pointing to exhaustion. The stock’s 52-week range ($1.08–$19.30) and current price near the 52W low suggest a high probability of continued downward pressure. With no options liquidity available, traders must rely on ETFs or cash-secured puts. A short-term bearish strategy would target a breakdown below the $1.45 support level, with a stop-loss above $1.55. The absence of leveraged ETF data complicates direct sector exposure, but the biotech sector’s mixed performance (Amgen up 0.09%) indicates limited sector-wide tailwinds.

Backtest Sonnet Stock Performance
The requested back-test has been completed. To explore the full performance statistics, trade list, equity curve, and risk metrics, please review the interactive report below.Key assumptions & notes:• Exit rules (20 % take-profit, 15 % stop-loss, max 20 holding days) were set as sensible defaults since no specific exit criteria were provided. • Event dates were defined as the trading day immediately following any daily close-to-close drop of 53 % or more. • Results cover 3 Jan 2022 – 2 Dec 2025 using daily close prices.Feel free to open the interactive panel to inspect cumulative returns, trade logs, and detailed statistics, or let me know if you’d like to adjust the entry/exit parameters or analysis period.

A Crucible for Sonnet: Will the Merger Deliver or Destroy Value?
Sonnet’s 53% intraday collapse reflects a market demanding clarity on its post-merger identity. While the stockholder approval removes a key regulatory hurdle, the lack of operational details about the combined entity leaves the door open for further volatility. Investors should monitor the Form 8-K filing for final voting results and scrutinize the proxy statement for strategic alignment. For now, the bearish technicals and absence of options liquidity suggest a cautious stance. Watch Amgen’s 0.09% gain as a barometer for sector resilience—if biotech sentiment improves, SONN’s discounted valuation could attract speculative buyers. Immediate action: short-term traders should target a breakdown below $1.45, while long-term investors await concrete operational updates post-merger.