On Tuesday, shares of StemCells (STEM) tumbled by 83% after the company announced that it would completely stop its phase 2 Pathway study, for using the company's HuCNS-SC human neural stem cells to treat spinal cord injury. The company had to terminate the study because while the Phase 1 study of six patients had showed some improvement, long-term data coming in showed no signs of efficacy. At the same time, the company announced that it would commence an 'orderly wind down' of all operations.

The company, which had been thinly traded, was trading at just over $3 before Tuesday's announcement took it down under 60 cents, reducing its market cap to about $7M.

StemCells' stated next move is to see if it can monetize its assets by selling them but shareholders may not recoup any losses. What is most shocking is that the company is disappointing its shareholders because it is calling it quits. Instead of trying to move on to another target with the platform, the company says that it will not raise any more cash to move on with the company. Before the announcement it only had $5.5 million in cash and cash equivalents, it says, and clearly it realized that with an impending loss of market cap it was unlikely to survive. The company also cancelled a previously announced rights offering.

When a company says wind down operations, that's a nice way of saying that it is shutting down. It is a shame what happened to this company, but maybe it should have continued into other areas utilizing stem cells. Before StemCells targeted spinal cord injury it had another program in Wet AMD or wet age-related macular degeneration. Regardless, it would be prudent for investors to steer clear of this name as it attempts to shut down operations.