April 29 (Bloomberg) -- Dendreon Corp.’s 69 percent plunge yesterday began with orders to sell hundreds of thousands of shares at whatever price buyers would pay for them.

More than 3 million Dendreon shares changed hands as the stock fell from $24.25 to as low as $7.50 in 70 seconds, before trading was halted at 1:27 p.m. in New York, according to data compiled by Bloomberg. In the first 20 seconds of the sell-off, more than 260,000 shares were sold at the so-called bid price, or about 60 percent of the total, showing investors were willing to accept almost any offer to unload the stock.

Shareholders who sold were burned when the Seattle-based drug developer said minutes after the halt that its Provenge cancer treatment extended the lives of men in a clinical study, spurring a rally of more than 130 percent after hours. The Nasdaq Stock Market investigated the drop and said it would take no action.

“It could have been something as simple as a fat-finger order -- somebody went to sell 7,000 shares and instead sold 70,000 shares,” said James Angel, an associate professor of finance at Georgetown University in Washington. “It could have been manipulation; somebody could’ve been trying to make things run the wrong way. Or it could’ve been panic for no reason at all.”

Dendreon’s trading during the plunge was almost seven times greater than its average for similar periods yesterday, data compiled by Bloomberg show. The “bid” level represents the price initiated by the buyer and is the most he will pay for the shares. Dendreon’s ratio of trades at bid and ask prices is roughly even in April, Bloomberg data show.

Trades Stand

Nasdaq initially suspected the Dendreon swings were the result of a broker error, the market said yesterday before announcing it would let the trades stand. Wayne Lee, a Nasdaq spokesman, and Brendan Intindola, a spokesman for the Financial Industry Regulatory Authority, declined to comment today.

Regulators are reluctant to cancel trades because it can penalize investors who bought in good faith, Angel said. For example, an investor who purchased Dendreon at a discount yesterday may have sold it when the shares rallied.

Dendreon more than doubled from yesterday’s last price during regular trading today, closing 5.4 percent below its level when yesterday’s plunge began. The company presented the Provenge study at a meeting of the American Urological Association in Chicago. The medicine stands to generate $2 billion a year in revenue, said Joel Sendek, an analyst for Lazard Capital Markets Ltd. in New York.

Previous Swings

On April 14, Dendron shares more than doubled to $16.99 after the company said Provenge significantly prolonged survival in a study designed to satisfy criteria for U.S. marketing approval. The full results of that study were released yesterday.

“This is a stock that was around $4 or $5 in early April, so a guy who has ridden this to $21 has a four-bagger in three weeks,” said Bernard Lirola, a fund manager at Needham & Co., which oversees more than $300 million in New York. “It can be very appealing to just take your profits and run.”

Price swings in Dendreon are big even by the standards of biotechnology companies, attracting short sellers and traders who seek short-term profits. Dendreon’s historic volatility, a measure of day-to-day price swings, has nearly quadrupled to 383.47, the highest since May 2007 and more than 10 times the realized volatility of the Standard & Poor’s 500 Index.

Bearish Bets

Short interest in Dendreon, the number of shares that have been borrowed and sold in anticipation of a price decline, totaled 21.6 million as of April 15, more than a fifth of the number available for trading. Hedge funds own 35 percent of the shares, according to data compiled by Bloomberg.

Katherine Stueland, a company spokeswomen, declined to comment today. Mitchell Gold, Dendreon’s chief executive officer, called the plunge “perplexing” on CNBC after the close of trading yesterday.

This isn’t the first time bets against Dendreon backfired. The shares more than tripled during trading on March 30, 2007, when Provenge won the backing of a Food and Drug Administration panel.

“This time there’s a lot less leverage rolling around, but there’s still guys who made major, major bets against the data,” said David Miller, chief executive officer of Biotech Stock Research in Seattle. “If it turns out there were shenanigans, it doesn’t surprise me at all. There’s a lot of incentive to do that because guys were once again really short this stock.”

Miller, who said he’s been bullish on Dendreon for nine years, heard various rumors about the company yesterday.

Trader Stories

“One was that the company was announcing a 2-for-1 stock split, another one was that somebody hit the wrong button, a third one was that somebody either put out a rumor or a bogus abstract that showed bad data,” Miller said. “None of these rumors came from anyplace that I would consider having any kind of knowledge.”

Selling can feed on itself as lower prices for a stock cause preset orders to be executed. A stop-loss order is an investor’s instruction to a broker to automatically sell a security when the price falls to a certain level.

John Kennedy, a financial adviser in Toledo, Ohio, placed a stop loss on his 1,000 shares yesterday to trigger at $19.70, more than 8 percent under its opening price. The speed of Dendreon’s decline meant his shares were sold at a price as low as $9.69, sparking losses of about $7,500, he said.

“What you have here is a situation that is obviously irregular, and suspicious of manipulation,” Kennedy said in an interview. “Nasdaq is ill-served by their silence. They are fanning the flames of suspicion that will bring about closer scrutiny by regulators. There is not a lot of transparency.”

To contact the reporter on this story: Elizabeth Stanton in New York at estanton@bloomberg.net

Last Updated: April 29, 2009 17:09 EDT