STADA (SAZ, DE0007251803) – Sell short but not yet

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This topic contains 4 replies, has 1 voice, and was last updated by  Vasily Nekrasov 11 months, 1 week ago.

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    Vasily Nekrasov

    STADA is the leading German producer of generics. Its stock intensively grew last year since Bain und Cinven wanted to take STADA over. Now the acquisition is failed and Bain und Cinven are not allowed to try again for one year (unless BaFin – German analog of SEC and STADA itself agree).

    As expected, STADA’s stock dropped … but suddenly got started to recover! Most likely, the market speculates about the acquisition retake as it was with Celesio (Stuttgarter pharma company).
    Additionally, the P/E of STADA is not extraordinary high among peers. Last but not least, STADA’s management emphasizes the company is going to grow aggressively.

    That’s why: selling short is an option but not from current level. I will do it if the stock (temporarily) recovers to €62 (or better to €64).


    Vasily Nekrasov

    As I expected, STADA has reached €62. On 03.08.2017 they will publish Q2 2017 report. Recall that the market can react irrationally!
    So for conservative traders I recommend to wait for this reaction … and if stock jumps then go short (unless the report turns out to be really super-duper).


    Vasily Nekrasov

    I guessed the significant price levels surprisingly precise. Now the stock reached €64 (and then fell a little bit below). Bain Capital and Cinven are going to make a new acquisition offer.
    The previous acquisition prices was €66. Likely it will be at least as high but not much higher. So there is about €3 or €4 growth potential and (from recent history) about €6 drop potential if the acquisition fails again.
    So the odds are for going short. But going short, never forget the money management (and Volkswagen short squeeze).


    Vasily Nekrasov

    I sold short at €64!
    By the way, the news that Stada’s CEO and CFO resign is somehow left unnoticed.
    But this is another good reason to go short!


    Vasily Nekrasov

    Stada turned out to be a covered stock,

    Bain Capital und Cinven try to acquire it once again. The new offer price is set to €66.25 but now they need only 63% of shareholders agree.

    Additionally, there are Hedge Fonds in the game.

    Thus close position at €65.3
    Though from rational point of view the price shall not exceed $66.25, there might be an irrational exuberance. Since this is a short position, better close.

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