Holy crap, 2016 is such a shitty year for my healthcare stocks.
Today, Allergan is down about 20-22% after hours because of the US government new inversion rules (which are not precisely known at this moment).
Let's remind that Pfizer has made an offer last fall to buy Allergan:
According to the terms of the deal, each Allergan shareholder will
receive 11.3 shares of Pfizer stock for every share of Allergan share
they own. Pfizer is also kicking in another $12 billion in cash for the
deal. That means when the deal closes, Allergan shareholders are likely
to get around $355 a share.
It looks like the deal is in jeopardy. The new government inversion roules happen because too much money is going out of the states because taxes are too high there. For exemple, the irish tax rate (Allergan) is about 12,5% VS 35% for USA (Pfizer). The after hours results are almost identical as the difference in taxes between the two countries (22% difference).
Once again, the market reaction seems crazy to me:
1- Before the deal, around november 20th 2015, you could buy a share of Allergan for about 300$;
2- After today's news (probabilty of a deal bust) shares are selling at about 220$;
3- Pfizer shares are now selling at about 31,60$ (up 3% after hours);
4- I don't understand.
The only logical explanation is that the market believes that the deal won't happen. It wouldn't be a bad thing in my opinion because Allergan is a great company (high growth) while Pfizer is not such a good company (anemic growth).
With or without Pfizer, Allergan is still a great company. It should continue to do well and could be acquired by another company, probably from somewhere else than USA. So, if the transaction fails, it's OK for me.
But my opinion has absolutely no value in that fucking crazy market. Maybe Allergan could drop to 150$ tomorrow. It could even go fucking bankrupt because nothing surprises me anymore.