Thursday, February 02, 2017

January 2017 Performance

January was a rough month due to my Rite-Aid position. I took another stab at it based on the news that closing was imminent, but now it looks like it will be an eternity before / if it ever closes. I bailed out of my position Rite-Aid (Ticker: RAD) position with a ~ 15% loss. The toughest part of trading / investing is being rationale about losses and just not hope a losing position will come back. Looking back it was the right decision as Walgreen (Ticker: WBA) came back with a cut in the buyout price. If I held on, my loss would have doubled to ~30%+. Obviously, the Rite-Aid position negatively impacted my January performance, resulting in a loss of ~ 4.50% for the month. Actually not bad, considering that I had a relatively large position in Rite-Aid and was down over 10% at one point. The Rite-Aid arb play is definitely one for the books…

I’m entering February with the following special situations / merger arb plays: Ariad Pharmaceuticals (Ticker: ARIA), Actelion (Ticker: ALIOY), Wafergen Biosystems (Ticker: WGBS), and Kate Spade (Ticker: KATE). (1) Ariad Pharmaceuticals – I’m playing this one via short Puts. I see this as a relatively low risk play as Takeda is acquiring the company via a tender offer. Takeda just received anti-trust approval for the deal and everything seems to be falling in place for the completion of the tender offer on February 15th. (2) Actelion – A large deal as J&J is acquiring Actelion for $280 in cash plus the R&D spinout. This deal is anticipated to close by the end of Q2. The price just took a little hit with French regulators recommending to physicians to stop prescribing Uptravi due to patient deaths. I like the risk reward here. (3) Wafergen Biosystems – The company should be announcing Q4 revenue numbers soon, which will determine the final buyout price. So it’s wait and see… Finally (4) Kate Spade – Potentially looking at several strategic acquirers, looking at a price in the low to mid 20’s.

I’m looking at better risk management as Rite-Aid demonstrated my weakness in this area. Looking forward in seeking out profitable special situation plays in the upcoming year...


2017 Performance Year to Date = -4.50% with the running monthly returns as follows:

January -4.50%

36 Comments:

At February 02, 2017, Anonymous Anonymous said...

dear friend, I need help in INVN do you think it is a good spread now and worth the risk? Jitters sent the stock down saying could lose AAPLE that account for 40% of revenues. Do you think that TDK that buy INVN for a long term investment can walk away just for this? they knew the risk of such business and mergers are here to growth business together.
a your view will be appreciated.

 
At February 02, 2017, Anonymous Anonymous said...

while about Actelion can you make a resume, the deal it's not just 280CHF cash correct but involve something else. To get paid just cash there is a strategy or there is a risk to receive the shares of the spun off? if you can clarify which strategy can be done.

 
At February 02, 2017, Blogger Money Turtle said...

INVN: Need to see what exactly the material adverse clause says, but generally you can't get out of a deal just because there is a a decline in potential revenue / earnings. It's a very high hurdle to get out of a deal using material adverse event for the reason.

Actelion: At deal closing you will receive $280 per share in cash for each share of Actelion ($70 per share in cash for each ALIOY) plus the R&D spin off. Still need to determine what additional steps the ADR holders need to perform in order to receive the spin off company.

 
At February 02, 2017, Anonymous Anonymous said...

So for INVN what you mean is that in the case INVN can fight for the full price of 13.00 USD in that case, or the maximum is that can get the termination fee if TDK is unwilling to pay even that? I hope that could be positive the situation and TDK that knew the risk won't walk away. Let's be serious, it's a so young company INVN and everybody speak well about the know how, doesn't matter the business plan at 3/5 years and the growth that they can achieve together? that's my point to just don't scare myself and close here with a loss of 3% and switch to another deal.
For example I would switch to MGI/ANT, because I believe they will approve MGI deal, we speak even there of a small business, with debts, fragmented market, where who want could have access, and ANT has lot of cash so U.S. if would fine for irregularities can get the cash.

Of so for Actelion is there the risk that the CASH we get plus the selling price of the spunned off company will give us a loss? there is no way to be sure that the company that they will list (they will list in the U.S. exchange or Switzerland), will open to a price that will make the deal profitable correct?

 
At February 02, 2017, Anonymous Anonymous said...

Btw, I don't know if it is for you also... but I think yes, in the past 6 months the market is becoming a bit tricky and even with experience is becoming quite hard to avoid troubles in some deal.

 
At February 02, 2017, Anonymous Anonymous said...

CAB cabelas spread 20% ... even before pre-deal.
I just afraid of the high debt of Cabelas or here was a good entry point... what you think MT?

 
At February 02, 2017, Anonymous Anonymous said...

which is the real debt of Cabelas? I see that has debt for 3.5+ billions, is it true?

 
At February 02, 2017, Blogger Money Turtle said...

Yes, the last 6 months have been a very difficult environment for arb / special situation plays.

CAB - You have Capital One and anti-trust issues rolled up into one. Lots of risk there. I'm not playing it...

 
At February 02, 2017, Anonymous mergerpie.com said...

i had put together a map of both cabela and bass pro stores.. 48 stores overlap in my opinion..not easy for divestitures.. http://www.mergerpie.com/list-of-bass-pro-and-cabela-stores-in-u-s-for-merger-analysis/

 
At February 03, 2017, Anonymous Anonymous said...

can we do a team via skype, or other chat tool to discuss portfolio size and deals?
because I think that the past 6 months yes where very hard, but if we could combine experience together may be we could perform better. For example there are deals like WGBS that are brilliant, while we could avoid risks like RAD, to bet on smaller spreads but safe (LNKD and example). To bet strong on some deal like Actelion etc etc.. I mean, alone you get distracted from many issues of the life, with a team and together we can focus better on a plan, portfolio sizing, avoid risk and do not miss some deal..

 
At February 06, 2017, Anonymous Anonymous said...

INVN big spread. For me it's a buy opportunity. Jitters, chatters just like ghosts, CFIUS worries... all no sense. TDK can buy INVN it's not an issue, no antitrust, and if lose apple contract just nothing that concern with a long term investment that TDK needs. What do you think? I think that at 11% yeld INVN is a must to follow... please MT study it! thanks.

 
At February 08, 2017, Blogger lamano said...

Watch out for becoming result oriented: RAD was not a bad play because it did not work out, neither is the fact that WGBS has gained substantially reason to conclude that you made a good decision.

Lamano

 
At February 09, 2017, Anonymous Anonymous said...

RAD bottomed, IN at 5.40

what do you think of BRCD second request? it will be safe deal for you?

 
At February 10, 2017, Anonymous Anonymous said...

out from RAD 4% profit in 2 days.

 
At February 10, 2017, Blogger Money Turtle said...

That was a good trade with RAD. I'm not playing RAD, not only you have to deal with the FTC, you also need to make sure RAD is able to achieve the minimum EBITDA. WBA can walk with a reduced break fee of $162.5 million if RAD doesn't hit the minimum EBITDA. Something not many people are paying attention to..

 
At February 13, 2017, Blogger Eric L said...

http://seekingalpha.com/article/4045221-publicly-traded-merger-arbitrage-funds-top-10-holdings-q4-2016

top 10 arb stocks the publicly traded arb funds hold

 
At February 14, 2017, Anonymous Anonymous said...

recently even HSR is giving trouble.

After BRCD 2nd request, please can you tell me if HAR and INVN have passed the HSR still no news, it' is expired the date but to have an immediate YES or NOT status is always hard to find info/news.

If you can check and tell me if HAR and INVN they passed HSR or both for 2nd request too. thanks

 
At February 15, 2017, Anonymous Anonymous said...

Good time to exit WGBS or wait for final results?

 
At February 15, 2017, Anonymous Anonymous said...

crazy WGBS special situation really incredible. we could do 2/3 years profit on this one, crazy and crazy again!

a resource where to find all the special situation stocks? there is or not? I do not believe even dealanalytics was following micro cap like this.

 
At February 15, 2017, Anonymous Anonymous said...

WGBS so new range looks like between 6.23 and 6.86?

 
At February 15, 2017, Blogger Money Turtle said...

I haven't followed HAR or INVN. I don't see anything yet with anti trust approval...

I'm not aware of any resources that focuses on these microcap arb / special situations plays. Institutions will not play these so there's really not much demand for this type of service. I'm holding onto to WGBS for now. A nice beat, I was expecting $10 million for the year and they were able to do $10.7 million. I'm looking at a payout of high $6's to $7.

 
At February 15, 2017, Anonymous Anonymous said...

any news about MGI earnings? was yesterday... again a lot of troubles, bad bad each deal give some issue.

 
At February 15, 2017, Blogger Eric L said...

Top 10 arb stocks hedge funds are currently in

http://seekingalpha.com/article/4046200-top-merger-stocks-held-fund-managers-mid-q1-2017-edition

 
At February 16, 2017, Anonymous Anonymous said...

is a nightmare. HAR and INVN no news and HSR date experide. Today INVN with no reasons down 8% then up, now down again. MGI earnings not released... is becoming really ridicolous M&A very hard, too many troubles. RAD, CAB etc etc, very bad moment.

 
At February 16, 2017, Anonymous Anonymous said...

KATE up, may be you can exit here.

 
At February 16, 2017, Anonymous Anonymous said...

KATE maybe b/o is close, since they announced results one week before actual date..

 
At February 17, 2017, Anonymous Anonymous said...

dear MT, unlucky moment... now they arrested even Samsung CEO. Can you check the news and tell me if it is risky for HAR deal, or we can stay safe?

 
At February 17, 2017, Blogger Money Turtle said...

HAR: The arrest of the CEO shouldn't affect the buyout.

 
At February 27, 2017, Anonymous Anonymous said...

Exited WGBS and KATE today and bought more ALIOY.. thanks MT
Aapltrader

 
At March 01, 2017, Blogger lamano said...

This comment has been removed by the author.

 
At March 01, 2017, Blogger lamano said...

WGBS - KACHING!

Reduced before the numbers were out due to the elevated prices (and the same risks), bought back those shares at higher priced when the numbers came in, and very happy I did.

By the way...Rollie is fucking with us...Nice move to start the SEC filing about completion of the merger with a statement about the 'termination of a material definitive agreement' (turns out he thought it was most important to first discuss the termination of this lease agreement lol)...My pupils widened for a second..

 
At March 01, 2017, Anonymous Anonymous said...

someone made easy money trading WGBS buying 50,000 shares at 7.1 this morning

 
At March 01, 2017, Blogger lamano said...

Yes I noticed.

Not sure how such a trade could take place..at my broker the ticker has already been changed to a non-tradable one.

 
At March 01, 2017, Blogger Money Turtle said...

WGBS = $7.3471 I'll take it! One of the strangest merger arb plays I've been involved in, but also turned out to be one of the most profitable :)

 
At March 03, 2017, Anonymous Anonymous said...

U in TIME? Looks like 5 bidders circling

 
At March 03, 2017, Blogger Money Turtle said...

I've been looking closely at TIME, but just don't see a big buyout premium from where it's trading right now.

 

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