For the longs: I don't understand why anyone holding prior to the buyout announcement would even consider selling their shares at the current price. I am actually surprised that 60M+ shares yesterday plus
another 3M today actually traded hands (for a company that only has a float of about 78M shares)
Why do people actually believe they can do better than a potential 7% return each year for the next 3 years by NOT holding for simply the next couple of months?
The main factor holding down the price is that the CVR will likely return very little. Most investors may now be aware that the oft-quoted $0.50/share for 3 years is only if sales beat $200 million $300 million and $400 million in 2015, 16, and 17. The press release was misleading some folks into thinking those targets are $100 million less per year.
Those targets seem difficult to reach as the HIGHEST analyst forecast before the announcement was only 82, 165, and 225 million for those years (from istockanalyst). In fact, with those sales. the CVR would pay absolutely nothing. Even if you double the highest sales forecast the CVR would pay only about $0.10/year for 3 years starting in 2016. Discount that back to a current value and you see why the price has not been bid up.
Do you really think management, the same folks who know the real internal numbers and therefore are more likely to accurately forecast future sales than external analysts or people on the YMB.....the same management team who likely owns multiples more of the stock than you or I do......do you really think they would agree to an earnout if they did not believe it was probable, or at least likely, to be achievable? I doubt it.
Just a thought.
Maybe some of us see other opportunities that are available now (and that may or may not be available 3 to 4 months from now) where we could do significantly better than that potential 21% (over the next 3 years). I've never made a dime by knocking the decisions of others, but I've made quite a bit by "going with my gut" on when to sell and how to allocate my money. I sold yesterday because I DO think I can do better (as always, time will tell). Also, I wish the best to those who held and hope that it works out well for them.
Truthseekerguy, I agree with your rationale that you might have an opportunity today to reposition your cash. That is a legitimate reason to sell, if you think you can earn more elsewhere..
And I swear I will not continue to regurgitate the following as I, as well as a few others, have already posted this several times (this is my last time). But, you are "distorting reality" and not "seeking the truth" when you talk about "potential 21% over three years".
A more "truthful" way to look at it i if I can sell my stock for $6.56 right now, OR stay, get $6.44 cash at close, my real outlay" or "investment" going forward over that 3 years, or whatever, is only $0.12 (the delta between what I can get for my stock today, and the lesser amount of $6.44 I expect to get at close. More potential reward is not 21% over three years. Assuming the 12 cent scenario, its a potential 10-20 times my invested capital. Yes, I understand it could be zero. But it could be $1.50. And if you are one of those who expected the buyout to be $10, $12, or higher, and are disappointed that it's not, you likely also believe that Northera will sell well (increasing the potential CVR value)....otherwise, you would never have believed the $10-$12 "hype".
I agree, to each his own...I am not knocking anyones decision if they sell. But they have a right to "seek the truth".
True. One downside is you have money tied up that is earning nothing and will just go sideways until buyout and with no guarantee of 7% a year after that. Question is do you take a small premium over the buyout price or wait, lose that premium and potentially get nothing else? Like everything else, it's a gamble.
I'm not financial expert but I wonder in the following scenario how this is handled. If you own this in a ROTH IRA and have deposited your full amount for the year, will the IRS treat the cash deposited back into your account as above the limit and tax you on it? I do not know how that works but there could be something there knowing the IRS.
You mean the money you will get for tendering your shares? If so, no there is no problem with your IRA. You are merely selling shares already in the IRA. Just doing it via a tender offer rather than the open market. Any cash you may eventually receive from the CVR is likewise not a problem.
Exactly and on top of it, potentially earn 7% each year with nothing invested. No downside. The only wildcard though that may entice someone to sell is if this deal doesn't go through and it tanks. Maybe they are taking some off the table as a hedge.