Friday, August 07, 2015

Receptos Position

I’m finally finished building a long position in Receptos (Ticker: RCPT), which currently makes up ~ 28% of my portfolio. You’re probably aware that Celgene (Ticker: CELG) is acquiring Receptos for $232.00 in cash via a tender offer, which expires on August 24th. My average purchase price is $227.74 and looking for a net gain of 1.87% by the end of August (~23% annualized return assuming the cash hits my account on 8/31). I also sold a bunch of Puts on Receptos. We should know by next Tuesday if the antitrust regulators give the green light on this deal. When I see the odds are so much in my favor such as a deal like this, I’m very aggressive and play big. There’s also been a lot of speculation of a higher bid, but I just don’t see it happening.


At August 09, 2015, Anonymous Anonymous said...

Does 28% include notional value of put options or does that increase your exposure even further? Did you sell Aug or Sept puts?

At August 09, 2015, Blogger Money Turtle said...

The 28% does not include the value of the short put options. The short puts increases my exposure quite a bit.

I sold the following long dated Puts:

Dec 2015 $220 Puts @ $5.05
Jan 2016 $220 Puts @ $4.57
Jan 2017 $220 Puts @ $4.90
Jan 2017 $230 Puts @ $5.07
Mar 2018 $220 Puts @ $5.46

At August 10, 2015, Anonymous Anonymous said...

When do you expect the deal to close and the cash hitting the brokerage account?

At August 10, 2015, Blogger Money Turtle said...

I expect this deal to close on 8/24 with cash hitting the account by 8/31 or earlier.

At August 11, 2015, Blogger Money Turtle said...

I meant to say the deal closes after the tender, which would be 8/25.

Celgene just received antitrust approval so it's pretty much clear sailing towards the close now...

At August 11, 2015, Anonymous Anonymous said...

Any chance of MAE breaking the deal?

At August 11, 2015, Blogger Money Turtle said...

From what I can see, the MAE in the filing is fairly generic. It’s not tied to any outcome of a product. So even if there’s an adverse event of some kind, this deal will proceed. It is extremely difficult to get out of a deal using MAE as an excuse. The courts have taken a very dim view on companies using MAE to get out of a deal. I see the odds of MAE breaking this deal as extremely low to nil.

At August 12, 2015, Anonymous Anonymous said...

I lost this deal.
I have not realized was a tender offer. You had a good deal then.
I'm afraid of financials of RCPT that's why I avoid risks on it.

What do you think however to sell now the puts at 0.50/0.85 for those 10/12 days waiting? any risk to suggest?

and what about berkshire/PCP deal? do you like it? I do not expect there a yeld above 2/2.5% do you see any risk here?

At August 12, 2015, Blogger Money Turtle said...

If you sell the Puts now, it won't settle until the September options expiration of 9/18. All of the longer dated options will also be accelerated to expire in September. You will have margin capital tied up until that time. Unlike the stock where the cash will hit your account a few days after closing. I wouldn't be selling Puts at these prices as the premium is just too small.

I haven't taken a look at the BRK / PCP deal.

At August 14, 2015, Anonymous Anonymous said...

Listen. After M&A do we have some other arbitrage to do with some other strategies? I'm too much exposed to mergers due to the interests rates to 0% or below 0%, and markets too expensive and risky if not in bubble and rigged. By the way, we have to find something else to diversify.
Are almost 4 years I'm doing mergers, and sometime you do some mistakes, but in general, because I go into usually with 100%, it's really stressfull, and even if I'm using over 1M, to use small sizes like 10/20% per mergers, it's too little profit. So, any ideas, strategy, other on the market, to let work the $$$?
I'm afraid that mergers will be much more risky as the market will crash 2008/2009 like. And soon will be, just question of time. And many deals are long even 3/6 months now, so that adds stress too because there is the market risk when falling, more volatility that sometime can hurt you with more stress when you are heavily already in.
best regards.

At August 16, 2015, Blogger Money Turtle said...

I wish I know the answer. I'm just focusing on what's working now. Merger arb continues to work, but you are right... soon or later it dry up when the environment changes. Good luck on your continued success with your merger arb plays!

At August 17, 2015, Anonymous Anonymous said...

Ok. In october 2015, will maky the 8th anniversary of 0% interests rates.
It's too sad, hardest period of my life, 8 years to suffer to gain on markets the yeld to survive. Hope to see soon, for some crazy reason we don't know, yeld in US/EU/UK again back to a normal 3/4/5%, and Australia even more.
Seem like we will never be back to 2006/2007. Like the world is so changed.
This is all fake money!!! Virtual, printed, easy money. It's much worse of the Nasdaq bubble of 2001, that was driven from crazy and real cash invested badly.
Now we have easy money that made profits thanks the magnitued of QE.
I don't know whend and how the bubble will burst, but many signs are around, crude oil crash, China stock exchange failure, and so on.
I hope soon in a bearish market that will rise interests rates also for some reason.
In the worst case, we will have at least stocke exchanges and corporate bonds down, and we will buy them. But as I said, soon, annyversary of 8 years of 0% interests.
Not zero, even below zero, like in Switzerland, EU. That they never teached me to the school, nor I imagined. Crazy, now I got more experience, but what a price!


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