Jason Knapp
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A Stock that I Wrote Up In April Just Popped 40%...Special Situation Investing News - 8/28/2015

I have a whole list of stocks that I have written about in the past or own that I keep a close eye on.  One of them is an activist investor situation that I did a completely original write-up on back in April:

"An Activist Investor May Lead to Huge Gains in Ariad Pharmaceuticals

http://tmfdeej.whotrades.com/blog/43967078417

Here's the write-up plus a fascinating update:

Good news for special situation investors, like myself. Activist investing is on the rise. According to a research firm called Activist Insight, in 2014 344 publicly traded corporations were targeted by activist funds. That number represents a significant 18% increase over the previous year. 2015 is off to a big start for activists, with many predicting that we will eclipse the number of situations seen last year.

The problem is, not all activist investors are created equal. Some firms, such as JANA Partners and Starboard Value, have excellent track records of success. Others...not so much. The key is to keep a list of activists that have proven successful in the past so that one can keep an eye out for new special situations that they are involved with in the future. A newer activist firm called Sarissa Capital Management popped up on my radar yesterday. I am adding to the list of investors that I keep an eye on.

Sarissa Capital was founded Alex Denner. Mr. Denner has a very strong resume. He formerly worked under Carl Ichan as his lead analyst for the biotech sector. He lead Ichan's charge into Biogen $BIIB, which was a roaring success. Since Ichan took an activist position in the company it's stock has risen 655%. Denner was also actively involved in the sale of another Ichan position in the sector, Genzyme to Sanofi SA $SNY.

Sarissa Capital has taken up an activist campaign at a company called Ariad Pharmaceuticals Inc. $ARIA. Sarissa currently owns 7% of ARIA, which isn't chump change when you're talking about a company with a market cap of $1.7 billion. Denner also was recently awarded a seat on Ariad's board of directors and he is seeking to add his representatives for three more of the company's eight seat board.

As you can see from the following chart, the story of ARIA for pre-2014 shareholders is not a happy one:

A two-year chart of ARIA (blue) vs. the S&P 500 (red)

After its blood cancer drug Iclusig received regulatory approval in late 2012, Ariad Pharmaceuticals' stock was on fire, returning well over 500% to investors during the prior three years. Fast forward to the end of 2013 and boom, Ariad's stock imploded - dropping more than 80% after the Food and Drug Administration temporarily pulled the plug on Iclusig in the United States on concerns about its toxic side effects. That's when Denner and Sarissa Capital pounced. A man after my own heart, he began purchasing shares of ARIA hand over fist after the stock imploded.

After establishing a significant position in the company, Denner began attempting to oust Ariad's CEO and founder Harvey J. Berger. If the move is successful, Denner would like to see the company reign in spending, at least so that it is more in line with the potential market for any drug that is being worked on and even better for current investors potentially sell of ARIA to a larger company, one that has a bigger, more established oncology sales force.

Denner's plan may actually be working. Rumor has it that Ariad's current board of directors has had discussions with the CEO Berger about the potential for him to resign. Even if Denner is not successful in ousting Ariad's CEO, the company's current leadership may decide that selling itself to a larger drug maker would be preferable to an expensive proxy fight with an activist. Rumored acquirers of ARIA include Roche Holdings $RHHBY, Celgene Corp. $CELG, Amgen $AMGN, AbbVie $ABBV and Gilead Sciences $GILD.

An investment in Ariad Pharmaceuticals today is a bet that Denner will ultimately succeed in his plan to have the company taken over at a significant premium to the $8.90 that it is trading at today. Analysts have suggested that a selling price of $12 to $15/share would be in order. I am not personally purchasing a position in the company at this time, but I plan t keep an eye on the situation and I have added it to my on-line special situation investing portfolio."

I notices some strange trading action in Ariad this morning and Tweeted the following at 1:56 PM:

A couple of hours later: BAM!

$ARIA spikes 40% on this breaking news:

Baxalta in talks to buy Ariad: Report

http://finance.yahoo.com/video/baxalta-talks-buy-a...

See, it pays to read this blog and to follow me on Twitter @TMFDeej :).

Here's tons of amazing links to articles about Special Situation Investing for your weekend reading enjoyment!

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Spinoffs

Qualcomm: Can Jana Partners Get Us The Split?

http://seekingalpha.com/article/3474786-qualcomm-c...

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SPACs

Former SPAC Jason Industries $JASN Appoints New Directors, one is currently Chairman recent buyout Magnetek, $MAG.  This counts as another Hmmmm moment.

http://www.marketwatch.com/story/jason-industries-...

Garnero SPAC acquiring Brazilian men's clothing retailer Grupo Columbo $GGAC

http://www.thedeal.com/content/consumer-retail/gar...

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Warrants

Major Banks Still Offer Crisis-Era Upside Through TARP Warrants

https://sumzero.com/headlines/financials_and_insur...

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Investment Write-Ups

A Child Is Born: Miraculous Upside At Philip Falcone's HC2

http://seekingalpha.com/article/3474056-a-child-is...

Ballantyne Strong Offers 23% Upside From Activist Cost-Cutting, Buybacks Coming Up

http://seekingalpha.com/article/3469616-ballantyne...

Omega Healthcare: Quality At A Discount

http://seekingalpha.com/article/3469326-omega-heal...

It's The End Of Bombardier As We Know It

http://seekingalpha.com/article/3472246-its-the-en...

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Merger Arb

Mylan Holders Approve Perrigo Purchase

http://www.wsj.com/articles/mylan-holders-approve-...

Tsinghua chairman visits U.S. to discuss Micron bid

http://seekingalpha.com/news/2750516-tsinghua-chai...

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Hedge Funds

Hedge funds that crowded into same names likely to nurse losses

http://www.reuters.com/article/2015/08/28/us-marke...

Omega, Pershing Confident of Stock Picks Even as Gains Disappear

http://www.bloomberg.com/news/articles/2015-08-27/...

M&A Daily: Hedge Fund Hotels

http://seekingalpha.com/article/3474566-m-and-a-da...

Ackman's Pershing Square Holdings, Falls 13% In August

http://www.valuewalk.com/2015/08/pershing-square-a...

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Activist Investors

Activist Icahn Takes Stake in Freeport-McMoRan

http://www.wsj.com/articles/freeport-mcmoran-to-cu...

 Mondelez: Bill Ackman's' Massive Bet Officially Cheap

http://seekingalpha.com/article/3474576-mondelez-b...

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Investing News

Jefferies Distressed Loss Said to Near $100 Million in 2015. Bad news for Leucadia National.

http://www.bloomberg.com/news/articles/2015-08-27/...

The Imation transformation begins: NOL protection just put in place...$150M in NOLs...and De Perio's a deal maker...

http://seekingalpha.com/pr/14455676-imation-announ...

On Babies And Bathwater

http://seekingalpha.com/article/3475016-on-babies-...

Commercial Property Executive September Issue: Goodbye ARCP, Hello VEREIT

http://www.cpexecutive.com/in-print/goodbye-arcp-h...

Mom and pop learn to outsmart Wall Street pros

http://www.bloombergview.com/articles/2015-08-28/m...

CorEnergy Infrastructure Trust $CORR EnerCom Oil & Gas Conference Presentation

http://files.shareholder.com/downloads/AMDA-12151O...

CorEnergy Infrastructure Trust – Day Three Breakout Notes

http://www.oilandgas360.com/corenergy-infrastructu...

Historically, when spreads between MLPs & Treasuries were > 5.0%, MLPs were positive the next 12 mo. 100% of time.

http://blogs.barrons.com/incomeinvesting/2015/08/2...

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Economics

Fed vice chair indicates September rate hike still possible

http://finance.yahoo.com/news/fed-vice-chair-indic...

Oil Surges for a Second Day as Some Calm Returns to Equities

http://www.bloomberg.com/news/articles/2015-08-27/...

China Sells U.S. Treasuries to Support Yuan. Probably keeping a lid on rates.

http://www.bloomberg.com/news/articles/2015-08-27/...

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Last but not least, I leave you with a hilarious cartoon that was Tweeted by Jason Zweig ‏@jasonzweigwsj

Thanks for reading. If you liked the article (or even if you didn't and you are just a generally nice person), please give it a thumbs up or comment below.

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Have a great weekend!