It’s June 18, five days past a self-imposed deadline, and Aspen Investment Fund is nowhere to be seen with its alleged $640 million bid to buy Vivus, Inc. (VVUS), the struggling developer of weightloss drug, Qsymia. In the meantime, Aspen has booked a handsome three-week return on its VVUS position.
On May 28, Aspen filed a Schedule 13D reporting a 9.65% ownership stake in VVUS via call options and forward purchase contracts, and reported that the unknown investment fund may make a bid to buy Vivus outright before June 13:
Aspen Investment Fund is currently contemplating a conditional non-binding offer to acquire the Issuer at a total consideration of $640 million, which would be financed using Aspen Investment Fund working capital, Issuers cash & cash equivalents and debt from top tier investment banks. The conditional non-binding offer should be submitted to the board by June 13, 2014. Although Aspen Investment Fund currently expects to make an offer, it is under no obligation and provides no assurances it will do so, if there are any material changes to the Issuers operations, financial situation or enterprise value. Emphasis added.
Of course, the alleged purchase, which would have represented a 35% premium to VVUS’ May 27 closing price, sent the stock soaring. For Aspen, which built its VVUS stake from May 16 to May 23 at prices between $4.62 to $4.88 per share, much of this in call options expiring in July, the small fund is sitting on handsome and low-risk gains in less than 3 weeks.
Aspen Investment Fund LLC was formed on May 16, just weeks before the VVUS position and the possibility of a bid were made public. The fund’s general manager is Zoi Potsi, a citizen of the Republic of Cyprus.
Red flags aside, VVUS is up 12% since Aspen made its intentions public. With the June 13 deadline having come and gone, VVUS isn’t likely to keep these legs. For investors who’ve been waiting on a buyout offer, reversion to the mean, VVUS trading back to ‘pre-Aspen’ prices in the mid-$4s, would mean more than 12% of downside.
On a sidenote, we’re not particularly optimistic about EnteroMedics (ETRM) longterm prospects with VBLOC, which received a positive vote from the FDA’s Advisory Gastroenterology and Urology Devices Panel (GUDP).
