Re: Buyout “risk”
>E.g. Dew, I think you mentioned before that you didn't sell MNTA in the $20s because you felt the upside was much greater. How would you feel if NVS bought the company at $20/share?<
First, the facts: during the time I’ve owned MNTA (since Nov 2007), the high was 20.00 and this price was reached for a single trade on 8/6/08. Other than 8/6/08, MNTA’s high during the period I’ve owned it was 17 and change.
Now, let me address your specific question (“How would you feel if NVS bought the company at $20/share?”): The answer, of course, depends on the context. If NVS were to offer $20/sh for MNTA right now, it would represent a 129% premium to the market price. Moreover, my cost basis on MNTA is $5.94, so a buyout at 20.00 would mean that I had more than tripled my money on a very large position in a little more than a year. Why would I be unhappy about that?
If NVS were to offer $20/sh for MNTA at some later time, the attractiveness of the offer would depend on the circumstances of MNTA’s business at that time, so it would be silly for me to comment on such a hypothetical without specifying the context.
Finally, let me address your general question, which I would phrase thusly:
“How would you feel if your little gem of a biotech company were snatched away from you by a big bad suitor before your gem had the opportunity to reach its full potential?”
You can probably tell from the wording that I think this is a bogus question. In my experience, the investors who say these kinds of things on biotech message boards are the ones with an unduly emotional attachment to their stock picks. More often than not, you will find that these investors turn out to be the bagholders rather than the ones who actually make money from biotech investing.
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