Tuesday, May 21, 2013

Debt Deal Closed Last Night; Merck Up 4.7% On Triple Volume Today. Why? Goldman Sachs, That's Why.

We interrupt my dry, wonkish patter (on tax advantaged foreign earnings repatriation strategies), to note for the record that less than 24 hours after Merck closed on the $6.5 billion debt deals, it hired Goldman Sachs (a lead underwriter of the same just-closed debt deals) to conduct an accelerated stock repurchase, or buyback -- of up to $5 billion, or about 99 million Merck shares, at yesterday's NYSE closing price.

I have to wonder, though, whether the SEC market surveillance folk don't already have a file open -- given that Merck fell almost 2 per cent yesterday, on average volume -- only to rise 4.7 per cent today, on triple volume, to boot.

It sure feels like someone knew about the accelerated timing, and massive sizing, on this Goldman contract for the ASR. [I suppose it could be that the market finally agrees with me, that Suvorexant will be given a green light tomorrow afternoon at the FDA Advisory Committee meeing -- but that is not even a one quarter of one percent uptick event, in my estimation -- and Merck was up close to five per cent at various points today.] So -- does someone at Goldman have loose lips? We will soon know.

Well, if I was a Goldman Sachs bond buyer last night, who also happens to hold Merck common stock -- I might promptly ask to get best price sales treatment on my Merck shares, given that Merck is buying them with my money -- money I just lent Merck, yesterday.

From Merck's just-issued press release, then:
. . . .Under the terms of the ASR, Merck has agreed to repurchase $5 billion of its common stock from Goldman, Sachs & Co., in total, with an initial delivery of approximately 99.5 million shares based on current market prices. The final number of shares to be repurchased will be based on Merck’s volume-weighted average stock price during the term of the transaction, which is expected to be completed no later than November 25, 2013. . . .
This is exactly why that FINRA Rule 5121 discussion matters. It is very easy for the little guys to get crushed here -- but Merck will rise, as I said, through the end of 2013 -- in general, broad strokes -- and this sort of stuff is no small reason why.

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