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.
Author has no position in Nanosphere anymore
Thanks for sharing.
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.