“If the deal closes in November, owners of Kite Pharma would see a total return of 0.6% over the next three months, which is equal to 2.5% on an annualized basis – it thus seems reasonable for Kite’s owners to sell at the current price, I believe, unless they want to speculate on an even higher takeover offer by another company.”
I’m taking they mean “at the current price” being $180? Because I’m not selling at the $139 close.
This is my first takeover stock. I assume I ride this out until the deal closes (assuming, of course, that the speculated higher offer doesn’t materialize)?
Congrats to all KITE holders and thanks for sharing the wealth on my BLUE shares…that was very kind of you
KITE taken out for $11 Billion and BLUE sitting at $4.9 Billion…maybe this technology will have further interest from other suitors as a result…we shall see.
This is my first takeover stock. I assume I ride this out until the deal closes (assuming, of course, that the speculated higher offer doesn’t materialize)?
The price can go up or down, up on a competing bid, down on the deal unravelling. I usually sell early because there is usually not much upside left (2.5% on an annualized basis) and there is the risk of the deal unravelling and the price dropping as happened to me in 2007 with sallie mae (SLM)
The thing with biotechs is you have a few successful ones, like I DNDN, ELN, and VRTX, all it takes is one bad one to wipe it all away. You get a little cocky and loose patience. In the end the best ones come back again. to get in and out on Kite with a buy out triple, that is the way to fly! No need to worry about the FDA letter, or if the drug can be commercialized.
There are some new Car T drug stocks coming up the pike, maybe worth a gander at some point in time.
But one Kite beats a SHOP and a NVDA in hand.
Does make for an interesting portfolio decision though. Given the higher risk, there is only so much of Kite one can hold in their port, but one can hold a much higher percentage of a SHOP or NVDA as they are clearly less risky and more tangible.
Does 300% on a smaller position equate to 150% on a larger position. Mathematically one can figure this out, but that has always been my issue. I don’t like putting in so much work on a company like Kite and then only being able to hold a small portion in the port.
Seems you’ve had it going both ways this year! Kudos!
Usually, on news like today, I would sell out and take the money and run. This time I’m going to wait and see if someone else with deep pockets will come along.
Any thoughts on practical steps to handle this as an investor focused on high growth?
My own first thought is what has been suggested already: Sell and move on. Unless a higher bid comes in the price is likely to hover at $180 until the buyout is either completed (in which case I have either cash or shares in GILD) or abandoned (in which case the price falls).
The only hope for a higher price short term seems to be if another company comes in with a higher bid, but that sounds a little bit unlikely to me as both companies are agreeing to this deal already.
Seems the best choice is to move my money elsewhere. But … Am I missing anything on why I might want to stay invested?
While the short term win is nice … mine is good, but not as spectacular as some since it took me a while to buy in … I am actually disappointed since I think the longer term potential separately was greater. In that vein I actually hope the deal does fall apart since, even that means a short term loss from current levels, I think long term it would mean more.
I just sold all my KITE positions (held in 3 portfolios). I remember an old adage about birds in the hand versus in the bush.
Yeah, they might get a better offer, but I’m not sure how that would be handled in that both boards have already agreed to the sale. IMHO, there’s a lot more opportunity for the sale to unravel than for a better offer to show up.
Also, one thing that always troubled me about KITE is that this treatment is not like putting a pill on the market. It’s all new technology and a complex procedure. I was always concerned that even with full FDA approval they will have a slow sales ramp, limited by how many procedures they can actually process and how fast they can train medical professionals to administer them. Yes, the TAM is large, and yes they are exploring expanding to other cancers, but no matter what, my perception is that revenue growth will be slow.
I just sold all my KITE positions (held in 3 portfolios).
I sold all mine too, of course, and got about $179. Why take the chance of holding for a couple of months for $1 more, which is just about half a percent. It was a great run, but when we started out, I never thought we’d almost get a quadruple in seven months or so, never dreamt it!
Saul
Yes, just because both companies are agreeing does not mean a new higher bidder can’t show up but I would give them only a few days.
This is the reason I’ve decided to hold onto my position for the time being. I wouldn’t anticipate the deal would fall apart incredibly quickly, but could anticipate another company trying to bid higher. I don’t think I’ll let it linger around for too long, but don’t see the need to sell today either.
KITE’s board would be responsible for evaluating any other bids. If a bid comes in substantially higher, it would be difficult for them to accept the lower offer unless there were true synergies that GILD offers that another company could not. Even so, that would be a long shot. The board would be looking at a lawsuit from KITE shareholders if they accepted a lower offer.
So, for those reasons, I’ll stand pat for the time being.
Champagne? Maybe, but I have to say … if this wasn’t a high-risk pharma play, I’d be upset. I hate it when my winners get bought out. I’m still ticked off at WEB for buying out one of my small-cap favorites during the period when I was passively investing. I didn’t even know it for months afterward and had to pay fees for reorganization or whatever they call it when shares are ripped from your cold, dead hands.
We’ve all had high returns with KITE to date and then another 30% frosting today, while always appreciated, is not make-it-or-break-it life-changing. How much higher could it have gone if they stayed on their own through the whole process? 100%? 200? 1,000?
Or maybe they wouldn’t be able to raise enough cash, or have enough expertise in sales and marketing. And since it IS pharma, and since I did consider it very high risk, and since KITE saved my butt today, okay, I’ll chip in for some champagne. FWIW, I’m going to wait a week or so to sell unless news of risk of closing comes forward.
But let’s do it again (anyone mind if it’s not pharma?)
Now if someone were to buy SHOP . . . strike that. Never mind, forget I mentioned it. I never said a word. Can’t happen. Better not happen. Forget it. Not possible. Don’t even think it.
This is the reason I’ve decided to hold onto my position for the time being. I wouldn’t anticipate the deal would fall apart incredibly quickly, but could anticipate another company trying to bid higher. I don’t think I’ll let it linger around for too long, but don’t see the need to sell today either.
KITE’s board would be responsible for evaluating any other bids. If a bid comes in substantially higher, it would be difficult for them to accept the lower offer unless there were true synergies that GILD offers that another company could not. Even so, that would be a long shot. The board would be looking at a lawsuit from KITE shareholders if they accepted a lower offer.
We each make our own decisions. You are probably correct in assuming that the deal won’t unravel in a few days, so the main thing you lose is the opportunity cost of not investing your gains elsewhere. But don’t hold your breath on a better deal. When both boards agree it means that they also agree to what are usually pretty stiff penalties for a divorce. A “better” offer has got to be a much better offer to just to break even for KITE shareholders.
I’m not suggesting I believe there is another deal in the works or that it is highly probable. I’m suggesting the probability of another offer is greater than the unwinding of the current deal in the short term.
Excellent point on a separation penalty as that will most certainly be the case in any offer.
The one I recall most recent was the Skyworks/PMC Sierra/Microsemi affair where Skyworks was paid a considerable sum when their original offer was usurped. I think that was the name of the other two companies anyway.
But that very same example is also a good reason to wait and see. Again, not suggesting it will be the case here, but seems a bit more probable than an unraveling of the deal with Gilead in the short term.
Ah, an ethical dilemma! Having made a philanthro-capitalist investment which has paid off rather startlingly, do I trouser the proceeds with a smile or should I now reinvest the proceeds into GILD?
The Q. answers itself: it is the latter, but I think a biotech ETF will have to satisfy the problem.
I actually think this is the growth factor that was missing from Gilead and starts to make them investible from both a value and growth perspective.
It may not be as explosive as KITE on its own but Gilead is ultra blue chip.
I think a tougher question is whether holders think it is worth a second roll of the dice with another CAR-T player.
