Friday I sold my position in Nanosphere at $1.71, one cent above the $1.70 offer of Luminex. The market is clearly pricing in some probability of a small bidding war between the third party that made an unsolicited offer at $1.50/share and Luminex, and I guess the market is probably right about that. I don’t know nothing about this third party though, and since Luminex has already increased its price by 26% from its initial offer I doubt that there is a huge amount of room left to go higher. In addition to that the breakup fee was also increased, although a $3 million fee on a $75 million deal would probably not deter a seriously interested party.
So I wouldn’t be too surprised to see a higher bid emerge, but I have sold anyway. Mainly because I know that I would never speculate on this and buy a position in the stock at the current price. Often people use that kind of logic as an argument that can lead to only one conclusion: if you don’t want to buy it, you need to sell it, but I actually don’t think that is really the case. Selling incurs transaction costs that can be significant when it’s in the context of merger arbitrage where spreads are small. That’s why I waited for the price to go a bit higher than my threshold for where I wouldn’t buy the stock.
Disclosure
Author has no position in Nanosphere anymore
Hi AV,
Thanks for sharing.
Greetings
Valuetradeblog
How do you size your special situations investments?
That obviously depends on how I perceive the risk and reward in each situation. I think here I made it a 2.5% position.