Acacia Research-Acacia Technologies (ACTG)

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US buyer flips Woodford stocks after cut-price deal
By Daniel Grote 17 Jun, 2020 at 08:45
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US buyer flips Woodford stocks after cut-price deal
The US investor acquiring cut-price assets from the failed Woodford Equity Income fund is offloading the stocks just days after completing the deal, in one case generating a £750,000 profit from a sale at more than 12 times the price paid.

Acacia Research was earlier this month unveiled as the buyer of up to 19 of the fund’s biotech stocks in a £224m deal struck with Link Fund Solutions, the fund’s administrator, which is overseeing the sell-off of assets.

Stock exchange filings in the UK and US suggest stakes worth up to £150m in eight stocks from the former Woodford fund have already been transferred to Acacia, which has quickly sold on a substantial portion, raising an estimated £128m.

The price Acacia paid for those stakes is not disclosed by the filings, except in the case of Alternative Investment Market stock Midatech Pharma (MTPH).

They show the US investor bought a 9.9% stake in the business from the former Woodford fund for just £65,000 at a little under 1.7p per share on 4 June, the day the £224m deal was struck. Less than a week later the stake was sold for just over £817,000 at 21p per share, more than 12 times the price paid, netting Acacia a profit of over £750,000. The shares were trading at 20p yesterday.

‘If that’s true, that’s genuinely shocking, that something could be sold at such a discount to its market cap,’ said Ryan Hughes, head of active portfolios at AJ Bell. ‘It’s shocking that Acacia would be able to offload that at such a profit. Woodford’s investors would be right to feel aggrieved.’

Investors have sent shares in US-listed Acacia soaring 58% since news broke of its swoop on assets from the former Woodford fund, believing it to have secured the better side of the deal. Savers trapped in Woodford’s former fund shouldered a 20% loss as the sale, struck at a price well below the level at which the stocks were being valued, was announced.

Documents outlining the details of the deal, filed with the US Securities and Exchange Commission (SEC), show Acacia has squeezed further concessions from Link.

Final prices for stakes in four unquoted companies, Oxford Nanopore, Viamet, AMO Pharma and Novabiotics, are yet to be agreed. Acacia has secured agreement that should the price for those stocks prove higher than the initial offer, the difference will be discounted from that paid for the listed companies.

The documents also underline the delay investors in the Woodford fund face before receiving any money from the deal. While both buyer and seller are working towards a 30 November deadline, they can agree to a one-month extension, meaning trapped Woodford investors could be waiting until after Christmas to receive all the proceeds.

Acacia is incentivised to recoup its outlay through quick sales of the acquired stocks, the documents also show. An initial $35m (£27.5m) payment under the deal was released from an escrow account, funded by Acacia’s activist fund backer Starboard Value. By replenishing this account with the proceeds of the stake sales, Acacia is able to reduce its interest payments to Starboard from 8% to 3%.

Transaction filings to the SEC show Acacia sold an 11.7% stake in US-listed Evofem (EVFM.O) for $29.3m (£23.2m) just days after acquiring the shares from the Woodford fund. SEC filings also suggest Acacia has quickly disposed of a 7.7% stake in Theravance Biopharma (TBPH.O) acquired in the deal, in a sale worth an estimated £99m.

Other stocks transferred to Acacia as part of the deal include the former Woodford fund’s stakes in Tissue Regenix (TRX), Open Orphan (ORPH), 4D Pharma (DDDD), Synairgen (SNG) and Mereo Biopharma (MPH).

Stock market filings show Acacia has already sold the bulk of its acquired stakes in Tissue Regenix and Open Orphan, while smaller portions of the 4D Pharma and Synairgen holdings have been offloaded.

The deal documents suggest the Woodford fund’s stakes in Arix Bioscience (ARIX), Induction Healthcare (INHC), Netscientific (NSCI) and Sensyne Health (SENS) are also included in the £224m package.

Link and Acacia declined to comment.

https://citywire.co.uk/funds-insider/news/us-buyer-flips-woodford-stocks-after-cut-price-deal/a1369015?section=funds-insider&_ga=2.231136159.1496876702.1592409676-604276758.1592409676