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I'm not sure that jochen doesn't believe you lax. I think he may be questioning why the transaction (the hedge) was done.
Are his figures correct? (which it seems to be) If so, I join him in his question.
rum
vid, the meeting is next Wednesday. I believe it begins at 10:00am and is held at Ariad's headquarters in Cambridge, MA. It's a nice overnight trip for you. Bring your wife and stay in Boston.
You'll have a great time.
rum
I believe, when it is ALL said and done, it will be 21,500,000 at $12.00. From what I saw I think the net cost of the hedge is around $17 million.
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Understood, Vid. I'm just suggesting that the mood of the meeting could be greatly improved with some good news.
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Just a thought, but I think the Annual Meeting would go a lot smoother and more friendly if the Company came out with a nice press release announcing something like an encouraging new molecule.
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dreamer's back!!!
fan, that's a great question.
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You da man rum, do us proud. I'd go but it's not in the budget. It's all on you!!!
2da, you must know by now, I go to the meeting for the free bagels.
Seriously, I'm a numbers guy (and you're dead wrong about the "Short it, conversion shares greater than 1:1 at initial. a good screwing" thing. That works when a conversion is structured to adjust the number of shares depending on the per share price, but this isn't that.
With regard to your questions, I don't eat and sleep this stuff. I don't know what EGFR is and honestly I really don't care. I'm just guessing that CLVS is Clovis, but beyond that I don't know what "CLVS isn't the answer" means. And again, I don't care.
Since we're going over my shortfalls, I'm also struggling with what the meaning of "(answers you q vid)" is?
Your concerns about assets wilting on the vine are legitimate and understandable for my feeble Polish mind. I may ask about that.
A few more points:
Don't feel vindicated, you're mostly wrong. Feel free to once again go through the math of how this conversion equals a good screwing.
Those "canned crap answers" are what I believe to be true. I'm not insulted by your characterization, but if you don't believe any of it you really may want to move on. I know you don't want to miss out on anything, but boy, if you're correct you'll be kicking yourself in the ass for a really long time.
"If he's asking shareholders to buy the canned crap, why isn't the market?" The market is hearing it and discounting it. And today it's worth $6 and change. "BP?" They too would hear it and calculate their own discount. Likely more than $6 and change, but not enough to entice Dr.B.
"What is different about the potential of those drugs and this company today than last year" You know the answer as well as I. The difference is the devastating events of Oct. '13. The FDA went way too far in their actions. It was personal and very unprofessional (based on Pazdur's childish quotes).
Done for now.
rum
PS. If you're not going to the meeting I'm having your bagel too.
2da, you asked me to pose questions to Dr. B at the annual meeting. I believe I know the answers.
Doctor B, why didn't you do the best thing for the shareholders that have stuck by you for years? That would have been to sell the company.
I believe a portion of the answer is this:
Hey Rummy, Iclusig is a phenomenal drug that will accomplish amazing things for patients. Right now this drug has been bruised badly by the FDA actions of last October. (Whether or not the "fault" of those actions were purely the FDA or shared by Ariad, I don't know). If we sold today, we would get the equivalent value of selling a bruised drug. Time will prove this drugs true value.
113 is a yet to be proven potential "gem" If we sold today we would have been given the value of a "yet to be proven drug." Our labs believe very strongly in the compound and believe we will someday recognize a value of a BIC amazing drug.
The next compound is a long way from anything we can comfortably say. It's too new, but believe me that there is a great reason that we selected this compound above many others to concentrate on. If we had sold today, this compound would be a footnote for which we would receive nothing.
2da, That's what I believe the answer is. I fully know each of the above has risks associated with it. But, as I said in an earlier post, I was a buyer today. I hope I don't regret it and I hope that you have to eat your words. I believe you also hope to eat those words.
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Guynms26, As I stated last evening, the damage to Ariad was done last October. Because of that damaging event the company was either going to be sold or was in for a reasonable dilution. Those that have any familiarity with Dr. B would understand the possibility of a sale of the company was and is extremely low. What's left? Dilution.
The company could partner or sell one or more of it's drugs. To get enough funds it would take some significant dilution of our ownership. They could have issued straight equity...again dilution. The option of straight debt may have not been on the table. The investor that would purchase straight debt is a bit different than one that would purchase convertible debt. Ariad's risk profile may not have been appealing enough for a pure debt instrument.
The choice was this convertible debt. Yes, it involves dilution. But it isn't dilution at today's market price. Because of the financial instruments the company has engineered, the dilution is effectively at $12 per share. Apparently, due to some warrants utilized in the transaction added dilution will kick in should the share price appreciate well beyond $12.
All In all I think they chose a very good alternative. As for the price action today I can only surmise that those under the dilusion that Dr. B was going to sell out are now heading for the exit.
I've been a buyer today.
rum
I would say what's important is the conversion rate that is effective to the company. Of course the cost of the hedges is important as well. I think, as an investor the $12 effective rate is what effects me.
rum
I think the actual conversion price is less than $12, but with the financial instruments they purchased to hedge the transaction the effective conversion to the company is $12.
I don't want to be confused with someone that understands what they did because I don't really understand it based on the info provided.
rum
I'd say that they made a pretty good deal. Reasonably low interest rate and an a conversion price that is effectively $12 after some financial shenanigans.
rum
ARIAD Pharmaceuticals, Inc. (NASDAQ: ARIA) today announced the pricing of $200 million aggregate principal amount of its 3.625% convertible senior notes due 2019 (the "Notes") in a private placement. The Notes will be offered by the initial purchasers only to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the "Act"). ARIAD also granted the initial purchasers of the Notes an option, exercisable for 30 days, to purchase up to an additional $30 million aggregate principal amount of the Notes on the same terms and conditions. As a result of the convertible note hedge and warrant transactions described below, the effective conversion price for the Notes is expected to be $12.00 per share, which represents a 71% premium over the closing price of ARIAD's common stock of $7.02 per share on June 11, 2014.
I wonder when the terms of the Senior Notes will be released.
rum
I get the impression folks on this board haven't see a deal like this before.
2da, with the exception of the hedging instruments that they are stating that they expect to enter into, I have seen this before. The hedging is an added cost to the company and (I am guessing) will reduce the ultimate amount of dilution that we will see.
I don't know. But everybody got diluted, and I know that is no good.
As I mentioned earlier, the hurt we have experienced happened last October. The form of the dilution is now known. That's the deal.
Other options...Sell, yes I would have liked that, but we'd get a hell of a lot less than we would have pre-October.
Straight debt, sure but first it may not have been an option and if it was the coupon (interest rate) would very likely have been much greater.
Raise the price of Iclusig, maybe a good idea, I hope to ask Dr. B about that one.
rum
PS. We may know the terms tomorrow and Blackrock and Sarissa may be the parties involved. I'll bet they haven't shorted any shares.
Per Jaybe on the SI Board:
HB, at Goldman, just said terms of financing will close in the morning...
and, Per fitzdad55 on the SI Board:
Yes. It appears this has been in the works for several weeks with Black Rock.
You already have your money from the short, you have potential upside, and you collect interest that you sell to somebody.
But you have to use YOUR money to purchase the Note. And, why would I sell the interest I collect to somebody. I'll be using most of that interest to pay my margin interest because I'm short those 150 Ariad shares. And the interest expense will probably be "jacked up" when my broker finds out I'm only getting 100 shares to cover my 150 share short. LOL
One other thing (for now), the very biggest unknown has been made public. Ariad needed money and this is where they intend to get it (for now).
rum
I believe the warrants usually go to the IB's.
Okay, if the end plan is the investor believes that Ariad goes BK, then just short...don't lend.
If you believe there is upside you have to short almost 150 shares in my example to get your $1,000 to lend. Stock goes to $15 and you get 100 shares in conversion. You have to go on the open market and purchase 50 shares for $750 in order to cover your short.
It doesn't sound so good to me.
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All this financial hokey pokey has Alex Denner written all over it. I'm guessing what it all means, when the math is done, that Ariad has used a small portion of the proceeds to purchase private market options that will have the effect of reducing the final dilution.
I'm just guessing because my head is spinning from the wording of the release.
rum
For those that know HB well enough, the likelihood of him selling was always very low (perhaps with the exception of a very brief period after the October surprise when he was clearly shaken).
I would propose that the dilution happened then. Whether he partnered, sold a compound or issued stock. All those options were dilutive to our interests.
The difference now is we will soon know how dilutive (until the next round).
rum
2da, you are certainly the best mathematician on this Board.
Help me understand how a buyer of these instruments could lock in their profit already.
For example, if the conversion price (strike price) is $10. Let's take a $1,000 Note convertible into 100 shares in the future.
So, sometime this week I sold short Ariad stock, 100 shares at $6.75 and collected $675.00. I purchase a $1,000 Note that earns interest (that goes toward offsetting my margin interest expense). Now in 4 or 5 years Ariad stock rises to $15 per share. I collect my shares and have to use them to cover my short.
2da, where did I go wrong?
rum
I'm guessing that there is more to the story of the cancelled presentation.
William Blair knows Ariad is not too far from needing funding. Even if they had to bribe attendees to go to the presentation, I would think they would have kept Ariad on the agenda.
If there isn't more to the story certainly WB will have no role in any capital raise.
Just guessing.
rum
I really hate hearing CNBC talk about how biotech is back and we're down again.
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Amp, I'm suggesting that the reason the IDIX premium is so large may be because the value on the market (prior to the offer) was held down because of the hatred of Wall Street players. When Merck made its offer based on its true value assessment it made it appear that Merck is paying up in a big way.
To me it follows that if Ariad is disliked in a similar way, our PPS is now unfairly low and the true value is likely a great deal higher than a more typical buyout premium would indicate.
I also agree with you regarding the promise of the future. If we don't see a buyout before all these promised events occur, I'll likely be right here with you and yes the value could well be much higher.
All that being said, I'm sticking to the "Bird in the Hand..." philosophy.
rum
Jess, the difference between you and me is most likely our age. I'm getting to the point where I want to see the "promised land" in my lifetime.
And don't forget that old saying that starts, "A bird in the hand..."
rum
PS. I've been in this stock for just under 15 years. Yikes!
Amp, this situation with Idenix reinforces that Wall Street hates them. The real value of IDIX, as measured buy the Merck offer is $3.85 billion. With the hate that Wall Street brought upon them they didn't trade anywhere close to that value.
The HATE was working.
It follows that if Ariad is experiencing the same HATE, it could command an above normal premium in a buyout.
I have just recently decided that I would accept a $20.50 ($3.85 billion/186 million shares) buyout. How about it Dr. Berger?
Bring it on.
rum
Checkout the premium being paid for IDIX.
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br and Jess, I don't mean to speak for IIIverson, but I think he is doing his thing which is trading. Buffett is investing.
While we can all understand Buffett's philosophy and approach, I think even he would admit that there are pricing imperfections in the market all the time.
The majority of people invest with their emotions. That is one reason IIIverson's technical analysis often works.
rum
mican, your comments are 100% correct. You're also touching on a subject that is a personal pet peeve of mine.
By and large most companies are overwhelmingly owned by institutions. Some of those institutional holders are Exchange Traded Funds. These funds typically "rubber stamp" the wishes of the various Boards of Directors. Many other institutions are funds that solicit corporations to manage corporate pensions and 401(k)'s. For the most part they would never (or rarely) dare vote against a Board's recommendation. If they did they would risk being branded as trouble makers and would likely never see any corporate investing again.
Even Warren Buffett, Coca Cola'a largest shareholder when faced with a vote on Coke's outrageous management compensation plan said he was totally against the plan, but didn't want to vote against it. He took the cowardly way out and abstained.
Of course there are activist investors and there are the California Funds (CalPERS and CalSTRS)that refuse to go along just to get along. Neither of them rely on corporate funding.
Now that I've gotten a little of that off my chest, voting against management is futile, except that the "NO" votes really do piss them off. Little consolation.
rum
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lax, I don't disagree with your point regarding shareholders' rights programs, but do you have any thoughts knowing that Denner is on the Board?
I don't see Denner's interests being aligned with the remainder of management. It would seem his interests would be far closer to those of us that would welcome some buyout activity.
rum
HB to be on CNBC
Great call, III-man. Is it still a buy or are you taking a little off so you can load up later? I think you had a longer term target of $10.
2da, did you pick any up?
rum
Perhaps we can call some of the other presenters at ASCO to see which ones might welcome an individual investor to attend as their guest.
The negative reaction that TC got is not unique to Ariad and doesn't suggest anything regarding Ariad's attitude toward its investors.
2da, like you, I would like to get a sense of what's going on at Ariad. I'm a little puzzled by this quiet period, but I'm hoping that it doesn't mean anything negative. I cling to bits of optimism like Mican's post regarding Ariad's full court press.
Only one thing is certain regarding Ariad...if I sell, the stock will head 2damoon.
rum
TC, you really shouldn't be put off by their response. It's not the venue for individual investors.
You'll be welcomed at Ariad's Annual meeting and there will be the entire cast of characters for you to meet.
Also, when I first read Vid's response to your blog post, I thought it uncharacteristically rude of him. I realized it was in response to your blog (after I read the post). He's correct. Maybe he could have said it differently, but he wasn't disrespecting you (I don't think).
rum
From Jaybe on the SI Board:
GIST trial recruiting again at 45mg as of May 23rd...
Should see breakdown of efficacy between 3L vs 4/5L at ASCO.
He includes a link to the clinicaltrials.gov page as well.
http://www.siliconinvestor.com/readmsg.aspx?msgid=29553180
Ariad just mentioned on CNBC as one of the companies to pay attention to as ASCO begins.
Specifically the dosing studies for Iclusig.
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Hey wilco244, these explanations never make any sense to me. "They retain a firm to short their buys"
And does this firm ever have to cover those shorts???
I guess I just don't get it.
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