It’s a Scratch, Not a Ding for Biogen Inc (BIIB) Stock

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Did Biogen Inc (NASDAQ:BIIB) give you a surprise headache Thursday? If it did, relax it was only a scratch at worse, courtesy of a distribution from Biogen stock (and one that could pay big dividends in unlocking value for shareholders). Let me explain.

If you’re like many investors and went to check on your investments after Thursday’s market close and happened to click on the finance page at Yahoo — much to your surprise, you saw Biogen stock was under massive pressure during the session and finished off a walloping -6.20% at $264.23.

The good news is if you’ve been a shareholder in Biogen stock, by our calculations the price move was really nothing more than a scratch of -0.13%. How so?

BIIB’s large loss, if you came across it, was actually an illusion. Thursday marked the distribution of Bioverativ Inc (NASDAQ:BIVV) for Biogen shareholders of record on Jan. 17, 2017. Specifically, if you bought BIIB stock on or before the close of Jan. 11 (trade date plus three business days), for every 200 shares you now also have 100 shares of BIVV.

So, what about that minor scratch? Using the closing price on Jan. 11 in BIIB stock of $287.11, if an investor bought 200 shares the investment value would work out to $57,422, if we multiply the share price by quantity.

Fast forward to Thursday’s -6.20% closing value of $264.23 and for the investor still holding BIIB stock, the investment’s market value drops to $52,846. If we subtract the closing value from the initial purchase price, the investor appears to be underwater by -$4,576 or nearly -8%.

But if the investor factors in their new 100 share position in the BIVV spinoff, it’s not nearly so bad. Shares of BIVV finished Thursday at $44.98. That’s an investment value of $4,498 for the distribution. And the difference of -$78 on an initial investment of $57,422 works out to -0.13% or put another way, essentially a scratch.

The better news is today’s scratch could potentially unlock much larger gains for patient shareholders owning BIIB stock and BIVV as longer-term investments.

Bottom line, as a company Biogen is now free to focus on its core mission in the fight against neurological disorders like multiple sclerosis, where it is already the industry leader.

At the same time, Bioverativ which already has $325 million cash in the bank and sales of $850 million in 2016, can work more efficiently at delivering shareholder value as a major player in the global hemophilia market.

Additionally, if we were to sneak a peek at the other big picture, i.e. Biogen’s stock chart; that looks very supportive of future value as well.

02-02-17-biib-stock-chart
Click to Enlarge
Source: Charts by TradingView

As a trader that relies on options for hedging, the only real downside in owning Biogen stock and BIVV from our perspective, is the temporary re-configuring of those derivatives. You’d think in this day and age the process would be seamless. It is Wall Street, though, and the former’s are still MIA and the latter’s options are, at the moment, less-than-liquid and more trouble than of benefit to traders.

Investment accounts under Christopher Tyler’s management do not currently own positions in any of the securities or their derivatives mentioned in this article. The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT.

The information offered is based upon Christopher Tyler’s observations and strictly intended for educational purposes only; the use of which is the responsibility of the individual. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.


Article printed from InvestorPlace Media, https://investorplace.com/2017/02/its-a-scratch-for-biogen-stock/.

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