Sell Now or Hold for Close?

Two M&A deals hit this morning and both were in the portfolio. Here's the decision framework for anyone sitting on CNTA or APLS right now.

Apellis (APLS) — Biogen — $41/share cash $4 CVR

APLS closed Friday at $16.97 and is trading around $40.25 this morning. That's a 141% premium.

The case for selling now. You're within $0.75 of the deal price. That $0.75 arb spread is a 1.9% return for holding through a deal close that could take 3-6 months. That's dead capital. The counter offer probability is low, roughly 10-15%. Biogen already paid a monster premium. Potential interlopers like Roche, Novartis, or AbbVie would need to go $45+ to make a meaningful counter, and at that level the valuation starts to stretch on current Syfovre and Empaveli revenue. The board can defend this deal at 141% premium without breaking a sweat.

The case for holding. You collect the full $41 guaranteed. If a counter comes, you get more. But you're tying up capital for months to squeeze out an extra $0.75 per share.

Centessa (CNTA) — Eli Lilly — $38 cash + $9 CVR

CNTA closed Friday at $28.70 and is trading around $40.14 this morning. The deal is $38 cash plus a contingent value right worth up to $9 in milestone payments.

The case for selling now. You're already trading above the $38 cash component. The market is giving you $40.14 today. The CVR pays out in smaller milestone installments over time. That's money locked up waiting on clinical or regulatory events that may or may not happen. If you sell now, you're getting more than the guaranteed cash and you skip the CVR risk entirely. Counter offer probability is moderate, around 20-25%. The orexin space is competitive and Jazz Pharmaceuticals could view this as a threat to their Xywav franchise. Takeda has narcolepsy interest too. A rival could come in with a clean all-cash offer at $42-44 and beat the $38 without matching the full $47 CVR value. But outbidding Lilly takes serious conviction. Most companies don't want that fight.

The case for holding. If all three CVR milestones hit, total value is $47 per share. If a counter offer comes, you benefit. But the probability-weighted expected value of waiting doesn't beat selling at $40+ today and redeploying into the next setup.

The math on waiting

For APLS, CVR is worth $4 holding to close gets you an extra $0.75 per share over 3-6 months. That's roughly 4% annualized on dead capital. You can do better.

For CNTA, the CVR milestones are worth up to $9 but they're contingent and paid over time. At a 20-25% counter offer probability with a potential bump to $42-44, the expected value of waiting adds maybe $1-2 per share on a probability-weighted basis. Meanwhile your capital is frozen.

What we did

Sold both. Took the gains. APLS at +75% on cost. CNTA at +59% on cost. Combined profit locked in. Capital redeployed into the next setup.

The M&A thesis works. Five deals in March. Three from the watchlist. The best move after a win is to reload, not sit on dead money waiting for an extra dollar.