Author Topic: CELG  (Read 2377 times)

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Offline Kelvin Abrahams

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« on: 22/11/2019, 08:23:36 AM »
Hello Everyone,
Do we hold BMI, the replacement stock for CELG, or do we exit this replacement stock asap? I am holding CELG/BMI and was surprised to see that BMI has replaced CELG.  Price action today suggests the US market is not bothered.
Brisbane Qld.

Offline Dave McCulloch

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« Reply #1 on: 22/11/2019, 12:12:26 PM »
Hi Kelvin,

Thanks for your question, it is a good one.

Takeovers come up from time to time and there's a couple of different ways to handle them depending on your approach.

Celgene (CLG) is being taken over by Bristol-Myers Squibb (BMY). Note: not BMI.

Using a purely mechanical approach would mean selling the replacement stock, as we don't have any SPA3 Investor signals on the new entity, BMY.

Another reason for this is that any current profits you may have in the position are at risk should the deal not pan out as expected. Anything can happen.

If one was taking more of a fundamental view, then it would require closer attention and a deep understanding of what the potential of the deal is. Even then, there is no guarantee that the market may share the same view, and it raises the question of when to sell....?

This is a key reason for the use of a price action based mechanical decision making process. As such, accounting for this type of takeover scenario whilst not that common should be included as part of the Investment Plan.

Hope this helps.