Friday, January 16, 2015

Tendered Shares in Cubist

Yesterday, I tendered all my shares in Cubist (Ticker: CBST) and looking for this tender offer to close next week on January 20th. As you know Merck (Ticker: MRK) is acquiring Cubist for $102 in cash. I have a large position in Cubist and have been purchasing shares up to yesterday as the annualized returns continue to look very attractive (~ +20% annualized). I’m modeling the tender offer closing on January 20th with the cash hitting the account by Friday, January 23rd. My experience with these tender offers is that the cash hits your account in a day or two after closing.

I also have some short Puts on Cubist, which I purchased on the day of the merger announcement. Needless to say it was a wild ride with those Puts when Cubist dropped on the adverse patent ruling. The short Puts, which I sold for $0.75 jumped to ~ +$5.00. Fortunately I had sufficient equity in my account and wasn’t forced to liquidate to meet a margin call. Those same Puts are now trading around $0.30 and I plan to let those expire. You really have to manage your risk when dealing with options. You’ll never know when you will have one of those black swan moments.

Some other smaller arb plays that I have been involved in were Avanir Pharmaceutical, which closed earlier this week. I had a few short Puts on that one. One other arb play that I expect to close by the end of this month is Safeway (Ticker: SWY).


At January 20, 2015, Anonymous Anonymous said...

Will the safeway CVRs be listed on an exchange after the deal closes?

At January 20, 2015, Blogger Money Turtle said...

No, you will not be able to trade the Safeway CVR.

At January 20, 2015, Anonymous Anonymous said...

The news reports on SWY look a bit complicated. What will the shareholders of SWY get when the deal closes?

At January 20, 2015, Blogger Money Turtle said...

At this point, you will get the CVR representing the Mexican retailor: Casa Ley.


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