Today will be interesting in whether or not we can break into new highs for the week. It looked like Monday was going to trigger a breakout and run but that sort of fizzled. Yesterday was a good day and so today will be interesting to see if we can push those highs seen on Monday (and break through them). The news is a little light, which is fine as it will provide a cleaner signal as to the underlying trend in the sector.
1. RCKT is raising cash, which is fine given the recent run. You raise cash when you can and not when you have to, so I think this is reasonable. They already announced $22.25 as the price, which is a pretty small discount given the run it has had. They had cash into the first half of 2021 and I suspect this pushes the runway into 2022 (or maybe not as far if they need to gear up a commercial salesforce sooner than expected).
2. There was a lot of options in ARQL going off implying another bid coming for the company. Is that possible? Sure but it is really unlikely. This is not a white knight scenario where ARQL is unhappy with the bid and so would be open to another offer. These terms are mutually acceptable, which adds to the difficulty of a successful new bid. In addition, it is very likely that the board and financial advisors already solicited additional bids during the negotiations for ARQL. So why would someone not bid when a deal was being discussed and now suddenly outbids MRK? Of course, if for some reason someone wants to break this deal it would not be for a little more, they would have to offer substantially more but the odds of that happening (in my view) is very low.
3. BLUE has been strong on the back of analysts upgrades. It has been a relatively poor performer this year and really not one I have looked at in awhile. I suspect its relative weakness is for reasons similar to why I have not looked at it. Years of hype only to be followed by larger secondaries. Everyone by now knows the pattern in BLUE. It runs higher on hype, it gets diluted and goes down, then it runs higher on hype, and then gets diluted and so on. I do not blame management for raising capital but it seems to be the perpetual overpromise stock that under delivers. In addition, it is not necessarily cheap. The analyst is convinced that 2020 is the year that hype becomes reality but we will see. Given the larger interest in gene therapy it is probably worth some due diligence in the name and so I will be taking another look.
I will end it here on a quiet day.
Disclosure: Long MRK and RCKT
