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04-Aug-08
ImClone Systems is a Sell: Don't Play the Arb Game!!!
Happy Monday! Let's get right into the most important piece of news today! And I'm not talking those silly government statistics!
Last week, drug (the boring kind) giant Bristol-Myers Squibb (BMY) announced that it was offering $60 a share for biotech company ImClone Systems (IMCL). Well today, ImClone came back today and said said the following:
"...its Board of Directors has formed a committee to study the matter and to retain advisors to advise it in determining the appropriate course of action. However, the Board’s preliminary view is that the offer substantially undervalues ImClone."
Valuation in M&A is always tricky - tweak a discount rate here and play with a terminal multiple there and the numbers change pretty quickly. And Lord knows I don't know much about ImClone.
But I do know this - the arb game is not for individual investors. If you're a pro on Wall Street doing it with other people's money, while having the advantage of superior information flow, it's doable. But not for the homegamers.
Let's remember the poor shareholders of Yahoo! (YHOO), who relied upon absurd claims that Microsoft's (MSFT) $33 a share offer undervalued the company. Yahoo! is now trading at $19.80. Or what about Harman (HAR), who got offered $120 a share for the company before the deal fell apart? That stock closed Friday at $39.82.
Obviously, I don't have a clue what ImClone's worth. But I do know I'd be a seller today if I owned it. I mean, if I owned it even though I don't know anything about it. Hypothetically. Okay, I'll stop now.
Posted at 05:09 in External Blog | Permalink | Comments () | Top
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