hey BRAN I need some equities advice

[Spartacus]

about ICOS

 

[needtogetaas]

in

 

[Spartacus]

ICOS is the pharm co. responsible for bringing Cialis to market
in a partnership with Eli-Lilly
about a month ago Lilly made an offer to buyout ICOS for 32$ a share
and today the stock is surging well past 33$ per share
and I got my second phone call today as a shareholder of ICOS to approve the merger
the rub is some group that holds 5% of ICOS doesn't like the 32 offer and wants a 40 value

 

[Spartacus]

not that my holding makes a damn bit of difference
but I'd like the scoop

 

[bran987]

ICOS is the pharm co. responsible for bringing Cialis to market
in a partnership with Eli-Lilly
about a month ago Lilly made an offer to buyout ICOS for 32$ a share
and today the stock is surging well past 33$ per share
and I got my second phone call today as a shareholder of ICOS to approve the merger
the rub is some group that holds 5% of ICOS doesn't like the 32 offer and wants a 40 value

Well the way those things usually work is ICOS is entitled to royalty on the payments on the drug they developed and Lilly sells it retail, but you knew that I'm sure.

One of the reasons it's hard to value a buyout is that future cash flows are unknown, future demand is unknown, future competition is unknown, it all just goes into a financial model with various discount rates and time tables.

Sometimes buyouts are based on multiples of what competing firms are trading for, but in this case and in the case of many biotechs that is irrelevant, ICOS looks like it has a 100 P/E which just means it's an ultra high growth firm... no comps. really.

Carl Icahn tried to do this with one of my stocks last year, Fairmount Hotels. It was at $32 and he bit $40. He lost... after another firm saw what he saw they bid up to $45 and bought out the company... Icahn ended up making $180 million on his shares anyway...

Same thing happened to me with AX.

Long and the short of it is you're in a good situation, when two people are fighting over the price like this the odds are it will either stay where it is now or go higher... especially if this other company starts to acquire a larger stake and challenge Lilly... it's only a $2 billion company so that's not so far fetched.

If you are 4everhung, hold it, you've already got your shares and probably capital gains tax treatment if you've had it awhile. if you are a new investor reading this it's just gambling to buy it now.

 

[Spartacus]

Well the way those things usually work is ICOS is entitled to royalty on the payments on the drug they developed and Lilly sells it retail, but you knew that I'm sure.

One of the reasons it's hard to value a buyout is that future cash flows are unknown, future demand is unknown, future competition is unknown, it all just goes into a financial model with various discount rates and time tables.

Sometimes buyouts are based on multiples of what competing firms are trading for, but in this case and in the case of many biotechs that is irrelevant, ICOS looks like it has a 100 P/E which just means it's an ultra high growth firm... no comps. really.

Carl Icahn tried to do this with one of my stocks last year, Fairmount Hotels. It was at $32 and he bit $40. He lost... after another firm saw what he saw they bid up to $45 and bought out the company... Icahn ended up making $180 million on his shares anyway...

Same thing happened to me with AX.

Long and the short of it is you're in a good situation, when two people are fighting over the price like this the odds are it will either stay where it is now or go higher... especially if this other company starts to acquire a larger stake and challenge Lilly... it's only a $2 billion company so that's not so far fetched.

If you are 4everhung, hold it, you've already got your shares and probably capital gains tax treatment if you've had it awhile. if you are a new investor reading this it's just gambling to buy it now.

appreciate it(pun intended)

 

[bran987]

appreciate it(pun intended)

thinking about it more, odds are that the other company won't challenge Lilly to buy ICOS out, as this is a special situation where Lilly has synergies with ICOS that no other company in the world has (cialis) so the value to Lilly is higher than it is to anyone else.

This other company will just attempt to sway the major shareholders not to accept the offer, in an effort to make Lilly have to bid more. If they fail, the board will just accept the offer and your shares will be sold at $32. The market, however, by bidding the stock up to $33, believes Lilly will have to bid more to win the vote.

 

[Spartacus]

thinking about it more, odds are that the other company won't challenge Lilly to buy ICOS out, as this is a special situation where Lilly has synergies with ICOS that no other company in the world has (cialis) so the value to Lilly is higher than it is to anyone else.

This other company will just attempt to sway the major shareholders not to accept the offer, in an effort to make Lilly have to bid more. If they fail, the board will just accept the offer and your shares will be sold at $32. The market, however, by bidding the stock up to $33, believes Lilly will have to bid more to win the vote.

this is the quik on why I asked
my degree is a BS in economics with a side of accounting
I know how numbers move and follow investment shit for the hell of it mostly
and you just filled in what's going on perfectly