FSTX is being acquired.
Tender offer is @ 7.12 / share
Current share price is 6.33 / share
Risk is if the merger doesn’t complete the stock dumps back to $4-5
Tender offer will be launched within 10 business days, merger expected to occur in 2H 2022.
Seems like a decent return on a merger arb that doesn’t have any outsized risks (this is a small shitty biotech companies that’s unlikely to have any regulatory hurdles). Biggest risk is obviously that the tender offer fails.
The play here is to buy shares and tender them. I’m unsure as to what the exact timeline will be for the merger consummating, and when the cash settlement will occur, there’s probably additional risks for short dated options since trading will be halted if the tender offer is successful.
Never done this before. What’s the process? Shares are sitting at 6.15 right now so why would I not want to put all my cash into this and tender for a quick 15% gain?
Because there’s no guarantee that the tender offer is successful. I don’t see any reason why this deal shouldn’t go through, but that doesn’t mean there won’t be some surprise.
As with anything there’s risk involved, so you shouldn’t put all your money into any 1 thing.
Just a reminder if you’re playing this that tomorrow is the deadline to tender.
For whatever reason this merger-arb is pricing in a fairly large chance for the tender to fail (It’s still a 10% arb). I’m not sure why as I don’t see any negative news related to the acquisition, other than the boiler plate whatever law firm is investigating if shareholders got a fair price, which occurs on every acquisition.
The deadline on the tender offer was pushed back to next month. More than 50% of the shares (something like 2/3rds) were tendered by the original deadline though, so that removes the shareholder element of risk from it. I’m not sure why the deadline was pushed back, probably to deal with some regulatory stuff.
So there has been an update on this, apparently the merger is held up for a national security review (which is now an extended review), so that adds quite a bit more uncertainty to this, which is why the stock has declined quite a bit. That would explain why there was such a large arbitrage available.
I don’t really see what kind of national security risk a meaningless biotech company would pose, but with the whole china-taiwan situation, who knows what will happen with this. I have a small position and plan on seeing this through to the end.
I would actually recommend you untender, then retender to go through the process as a learning experience (assuming they don’t charge you fees to do so). This way you also get an idea of how long it takes them to untender and for the shares to be available for you to sell should you want to do so in the future
Well that was easy, just emailed the broker, told them to withdraw my acceptance and within the hour had my shares back. My plan now is to hold for a bit, wait for the ballon to rise, sell all shares, then put that cash into the fomc minutes realease, rebuy and tender it again if the gov allows it. Thanks again nekid
