TRC Capital's mini-tender offer irritates a flustered Biogen
TRC Capital’s trademark mini-tender offer strategy has peeved an anemic Biogen, which is still licking its wounds following the catastrophic failure of its Alzheimer’s drug aducanumab.
On Monday, Biogen said it had learned that TRC has sought to purchase up to 500,000 shares of Biogen’s stock at a price of $216.25 per share in cash, which is a discount of 4.41% to the closing price of the drugmaker’s shares on May 10 — the last business day prior to the commencement of the offer.
“Biogen does not endorse TRC Capital’s unsolicited mini-tender offer and recommends that stockholders do not tender their shares in response to TRC Capital’s offer…,” the company said in a statement, urging its shareholders to exercise caution.
Investors tend to flock to tender offers because they provide the rare prospect of selling securities at a premium above market price. However, mini-tender offers – for less than 5% of a company’s stock — can catch the unseasoned investor by surprise, as they may assume that the price offered includes the premium usually present in larger tender offers. Eventually, they learn that they cannot withdraw from the offer and may end up selling their shares at below-market prices.
Another pertinent difference is that mini-tender offers typically do not provide the same disclosure and procedural protections as traditional tender offers.
“With most mini-tender offers, investors typically feel pressured to tender their shares quickly without having solid information about the offer or the people behind it. And they’ve been shocked to learn that they generally cannot withdraw from mini-tender offers,” the SEC has warned.
For TRC, their trademark strategy is winning, as it allows them to aggressively pursue a ‘buy low, sell high’ scheme. They launch the mini-tender offer and then have the opportunity of selling any shares tendered to pocket the difference.
Just this year, they have various mini-tender offers across the industry, triggering the ire of companies such as PepsiCo, Visa, Northrop Grumman and DXC Technology. TRC has also made a number of such offers in the past within the field of biopharma, to companies including Pfizer, Alexion and Ionis.
TRC’s Biogen offer — scheduled to expire on June 12 — constitutes 0.26% of Biogen shares outstanding, as of the May 13.
But the Cambridge, Massachusetts-based drugmaker $BIIB has bigger problems on its plate. The bellwether biotech — ahead of the competition for its flagship SMA treatment Spinraza — has beefed up its board in recent months to placate its increasingly disenchanted shareholder base that has seen the company cultivate its late-stage pipeline around the all-but-dead amyloid beta approach. Its critics are less worried about the board, and more interested in M&A, given the company’s parched pipeline and the potential for stagnant long-term growth.
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