For all those who are sitting on pins this morning (and there are many), following every twist in the ongoing drama involving what until yesterday was supposed to be the biggest M&A deal of the decade, we have some news. Moments ago Reuters blasted that:
- PFIZER SAID TO LEAN TOWARD ABANDONING ALLERGAN DEAL: REUTERS
The stock promptly sold off. And then, not even 5 minutes later, Bloomberg blasted the following:
- PFIZER SAID TO SCRAMBLE TO SAVE ALLERGAN DEAL AMID NEW TAX RULE
The stock then promptly spiked but judging by the feeble response, not even vacuum tubes care much anymore.
So who does care? Well, as it turns out, a whole lot of people. RBC Charlie McElligott explains:
With AGN currently -19.0% against PFE +2.5% pre-open, the epicenter of the destruction will be felt within the arb community, where they have this trade on in size (ISI estimates +25mm AGN against -300mm PFE, with only 10% of that trading after-hours last night—i.e. “more to come” today) and lever it up 3 to 6 x’s. One then turns to other deals which might see forced spread-unwinding (e.g. AET / HUM, TWC/CHTR etc) as merger-arb books are scaled-back across Street (you don’t have to be an event-fund to have a side-pocket). Reminder, Merger Arb has been the only equity strategy posting a POSITIVE YTD return (HFR Merger Arb Index +1.6% YTD)…so you know a lot of funds were increasing the sizes of those books because it was working, against a much thornier long / short or market-neutral environment.
Speaking directly to this observation that this has implications far-beyond ‘just’ the risk-arb world: per the most recent GS HF Monitor (thru Q4 filings), AGN is ‘THE’ most consensually held stock across the broad hedge fund community (sampling of 860 funds): there are 80 hedge funds holding the stock as a top 10 largest position (tops of the VIP list), 107 HFs own it overall, it has an average 7% portfolio weight, and 16% of its equity cap is owned by hedge funds.
It’s highly likely that HC dedicateds won’t defend the stock for two reasons: 1) the broad question of ‘are the tax benefits still there to see the deal go through’ with these ex post facto changes to essentially what the acquirer is buying and 2) in light of the spec pharma pain YTD, low delta on managers sticking around to see how it plays out. Clearly last night’s “shoot first / ask questions later” response shows that arbs feel same way.
Запись Schrodinger’s Pharmageddon впервые появилась crude-oil.top.