Wednesday, August 24, 2016

More Medivation

I’ve been loading up on Medivation (Ticker: MDVN) as this represents a very nice risk reward merger arbitrage play. I have increased my position in Medivation to ~ 50% of my portfolio (I had a ~ 15% position prior to the Pfizer (Ticker: PFE) acquisition announcement). The current price of ~ $80.25 represents a net gain of ~1.5% (~15% annualized return assuming a close by September 30th). The tender offer will commence next week with a potential closing at the end of September. I see minimal regulatory risk and Pfizer is good with the cash. I really like these type of relatively low risk merger arb plays…

Friday, August 12, 2016

Sequenom, Linkedin and Diamond Resorts

I initiated a ~10% position in Sequenom, Inc. (Ticker: SQNM) at $2.37. This company is being acquired by Lab Corp. (Ticker: LH) for $2.40 in cash via a tender offer, which expires on September 7th. I expect this deal to close on September 7th, which would equate to a net gain of ~ 1.26% (~15% annualized return). I see this as a rather straight forward deal with minimum risk. It was rather easy to build a position at the bid price of $1.37.

I also picked up some Linkedin (Ticker: LNKD) (long stock and short Puts). Everyone knows this story and is probably a core holding for many large merger arb funds. I see this as a very safe arb play and an area to park some extra cash. I anticipate a closing by the end of November, which would equate to a net gain of ~ 2% (~6% annualized return). A rather boring merger arb play, but sometimes you need to be a bit conservative.

Finally, I initiated a position (~ 8% position) in Diamond Resorts (Ticker: DRII) at $29.50. This time share company is being acquired by Apollo for $30.25 in cash via a tender offer. The first tender expired and has been extended to August 24th. I see a good chance that this deal will close on August 24th if they’re able to quickly complete the debt offering.

Wednesday, August 10, 2016

Sold Wafergen

I had the unpleasant opportunity to experience the ups and downs in Wafergen (Ticker: WGBS). I initiated the position in May and recently experienced a nice run up into Q2 earnings. I sold ~ 20% of my position early in the week locking in some nice gains. In hind sight I should have sold more as the stock was pricing in strong Q2 revenue numbers. The stock fell sharply after the Q2 earnings report. The revenues came in a little light, but it was the revenue guidance that tanked the stock. The annual revenue guidance went from $12 - $13 million to $10 - $12 million. The short fall can be attributed to the placement of the icell8 instrument. These machines cost $250,000 a piece and purchasers are not closing in on the deals fast enough. It looks like some of the sales will be pushed into the next year. The revenue guidance reduction directly impacts the merger price as the final takeout price will be based on a multiple of revenues. I exited my position today as I have no confidence in their guidance. I still managed to generate a net gain of ~ 17% so I really can’t complain. I just got a bit overconfident and greedy. The market definitely puts you back in place…

Friday, August 05, 2016

July 2016 Performance

I’m kind of back from a little hiatus and just starting to catch up on things… I’ll start off with a review of the July performance. July was a nice break out month as several merger arb positions successfully closed. The first was Qihoo 360, which closed on July 15th. I built up ~ 40% position in Qihoo 360 and the closing of this merger contributed nicely to the July performance. I initially lost money in Qihoo 360 early on with the short Put positions during the panic selling of the China plays. I re-evaluated the situation when things settled down a bit and regained my conviction to go in big. The second significant merger arb play that closed was Multi-Fineline Electronix, which closed on July 27th. I basically rolled over the proceeds from Qihoo 360 into Multi-Fineline Electronix. I went in big again with Multi-Fineline Electronix as it made up ~ 60% of my portfolio. These positions were the primary contributors to the July performance. I never thought I would go in this big with the China plays, but I could not resist based on the probability of these mergers closing.

August will be a busy month for my other special situation / merger arb plays. First, Wafergen (Ticker: WGBS) (~10% position) is scheduled to release earnings after the bell next Tuesday. All eyes will be on the revenue numbers as this is the key in determining the take out price. Second, I recently initiated a position in Everbank (Ticker: EVER) (~20% position), which is currently in talks with TIAA. I’m expecting an announcement of the deal next week. Finally, indication of interest for Medivation (Ticker: MDVN) (~15% position) is due mid-month so news should be leaking out shortly.

So far August is off to a good start, but we’ll see how things unfold as the month progresses…

2016 Performance Year to Date = +14.93% with the running monthly returns as follows:

January -5.47%
February -3.50%
March +7.51%
April +0.84%
May +6.34%
June -2.6%
July +12.2%

Thursday, July 07, 2016

Some KU6 Media Co.

The current M&A environment is very challenging so you have to be nimble and take what you can get. Today, I picked up some KU6 Media Co., LTD. (Ticker: KUTV) at $1.02 (~ 5% position). This is a thinly traded stock and I wasn’t able to build a full position. Anyways, this is one of those China going private plays that will be closing very soon. The buyout price is $1.03 ($1.08 minus the $0.05 ADR fee). The company recently filed to terminate the ADS program with an effective date of 07/11/16 (the last trading day). The potential net gain will be 0.98% (~ 39% annualized gain based on the cash hitting my account by 07/15/16). It’s not much, but it’s as close to free money as you can get…

Tuesday, July 05, 2016

June 2016 Performance

June was a strange month as you were near new highs and then Brexit hit the market. The positive for the month was the closing of the Nanosphere acquisition by Luminex. I guess there was one other positive…  the nice earnings report from Constellation Brands, which I continue to hang on for the long term. Those two pretty much sums up the positives for the month.

M&A continues to be challenging as I wait for several deals to close. I have built up a position in Qihoo 360 (Ticker: QIHU) and based on the guidance by the company, this deal should close by mid-August. I like the odds of this deal closing, but it is a China acquisition so there’s going to be some doubt.

I’m also involved in the Medivation (Ticker: MDVN) special situation play. I initially entered this position based on the hostility by Sanofi (Ticker: SNY), but as I learn more about this company I actually like it as a standalone basis. I wouldn’t mind if Sanofi walked as I agree with the company that there is significant value creation ahead by expanding the indication of Xtandi and its potential pipeline. So it’ll be interesting to see how this plays out.

That’s it for June…

2016 Performance Year to Date = +2.43% with the running monthly returns as follows:

January -5.47%
February -3.50%
March +7.51%
April +0.84%
May +6.34%
June -2.6%

Wednesday, June 22, 2016

China Ming Yang Wind Power Group = Done Deal

China Ming Yang Wind Power Group (Ticker: MY) closed today as expected. There were clear indications since early last week that this deal was going to close today. The company filed with their ADR sponsor for the termination of their ADR program on June 13th. My net gain from this arb play will be 1.58% (annualized gain of ~ 48% assuming the cash hits my account by 6/27). This position comprised of ~ 17% of my portfolio. Now, let’s see when Qihoo 360 (Ticker: QIHU) will close…