Streetwise reporter Niall McGeePeter Power/The Globe and Mail
'BUSTED' DEAL OF THE DAY
Investors heavily in the red on Concordia's big stock offering
Days after it announced the terms of a $520-million (U.S.) capital raise, shares in Concordia Healthcare Corp. got slammed, losing almost 25 per cent of their value to close at $42.70 on Nasdaq.
The stock appears to have taken a hit for the same reason we saw weakness in many pharma sector stocks on Monday – the fear that the company could be forced to roll back price increases on its U.S. drugs or, at the very least, that the days of steep price hikes may be over. Shares in Valeant Pharmaceuticals International Inc. dropped 16 per cent on Monday after Democratic politicians asked for a subpoena to force the company to give up documents that would detail price increases on some of its U.S. drugs.
The plunge in Concordia's stock comes at a particularly inopportune time for some of its U.S. institutional investors, many of whom have just pledged to buy millions of dollars in shares at $65 a pop. So do these investors have any way out? Can they simply just say, "No, we actually don't want those Concordia shares"?
It doesn't appear so.
"There is no market out for the equity deal. There are no conditions to be met for closing of the transaction," said Mark Thompson, chief executive officer of Concordia via e-mail.
Underwritten deals typically have a "disaster," or a "material adverse change" out, but not a "market" out. In this case, the stock plunge appears to be a pretty cut-and-dry "market" occurrence.
In Concordia's underwriting agreement for the share sale, there are a handful of standard outs, including a "material change" that could have "a significant adverse effect on the market price," or an investigation by a regulator into the company's affairs. The bottom line is those that have agreed to buy the shares are stuck with them.
MERGERS AND ACQUISITIONS
Energy Transfer to Buy Williams Cos. after year-long pursuit
Energy Transfer Equity LP will acquire Williams Cos. in a $32.6-billion (U.S.) deal that will create a massive nationwide network of natural-gas pipelines. In June, Williams had rejected a $48-billion offer from Energy Transfer. Full story
Nexstar Broadcasting bids for Media General
Nexstar Broadcasting Group Inc. offered to buy local-television station owner Media General Inc. in a bold attempt to break up Media General's recent agreement to buy Meredith Corp.
The proposal, which values the Richmond, Va., company at about $1.85-billion, represents a premium of 30 per cent over Media General's closing price on Friday of $11.15 a share. Full story
National Bank to bar financial staff from trading individual stocks for their PAs
National Bank of Canada is barring its financial markets employees from trading stocks for their personal accounts (PAs), scrapping an often-lucrative perk for high-powered Bay Street traders.
The policy, set to take effect in March of 2016, is aimed at removing any risks of conflict of interest in trading for both client and personal accounts, the bank told employees in an internal memo.
It has caused consternation among some staff. Such trading, benefiting from a wealth of real-time market intelligence and expertise, can make up a large chunk of income for some, sources say.
The new rules will cover front-line employees such as investment bankers, traders and analysts, but will also extend to back office and support staff. Full story
Some higher-ups at National Bank already abiding by new stock trading policy
While most of National Bank's financial markets employees have until next March before they must abide by the new rules that will bar trading in individual stocks in their PAs, a number of the higher-ups are already abiding by the new rules.
"Some time ago the management committee of financial markets all committed to moving their own accounts to a fully managed model, just because we walk the talk," said Brian Davis, co-chief executive officer of National Bank Financial Inc., in an interview.
"It sets a much better message internally for us not to be in a position where our own trading activities could ever be called into question."
The comments from Globe readers ran the gamut. Some praised National Bank for taking the lead.
"This policy should be industry wide. Too many conflicts to manage oversight of so the logical solution is to allow them index investing or MF [mutual funds] investing," one said.
But another reader thought the new policy was overkill and predicts there could be unforeseen and not entirely desirable consequences from barring overt trading in stocks among financial market employees:
"As long as the trades are precleared by compliance, I'm not sure [of] the need for this. If anything, this risks employees participating in more subversive trading activity, just trading outside of their compliance oversight. Probably a really bad move, in my view."
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Niall McGee