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Avid Bioservices (CDMO) Set for Big Moves: An All-Cash Acquisition Awaits

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Written by Timothy Sykes Reviewed by Jack Kellog Fact-checked by Ellis Hobb
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Avid Bioservices Inc. shares surged as their stocks have been trading up by 12.02 percent on Thursday, largely driven by a strategic collaboration with a new research partner and an optimistic outlook on their recent biopharmaceutical advancements.

Highlights of Recent Developments

  • Avid Bioservices is being acquired by GHO Capital and Ampersand Capital for $12.50 per share, in a deal valued at $1.1B. This acquisition is set to boost the company’s stock value.

Candlestick Chart

Live Update at 09:18:07 EST: On Thursday, November 07, 2024 Avid Bioservices Inc. stock [NASDAQ: CDMO] is trending up by 12.02%! Discover the key drivers behind this movement as well as our expert analysis in the detailed breakdown below.

  • The acquisition deal represents a 13.8% premium over CDMO’s recent closing prices, a significant jump for stakeholders who stand to gain from the deal.

  • This move is expected to reshape the market landscape, offering Avid Bioservices a robust platform for future growth and expansion within the biologics manufacturing sector.

A Quick Dive into Avid Bioservices’ Financial Landscape

Avid Bioservices recently captured headlines with the announcement of a $1.1 billion acquisition deal by GHO Capital and Ampersand Capital. This acquisition is not just a financial transaction; it’s a strategic move to bolster Avid’s position in the market. Before exploring the implications of this acquisition, it’s crucial to understand the financial health and recent performance of Avid Bioservices.

Earnings Report Insights

Despite grappling with some challenges, Avid Bioservices showcased a resilient performance in their recent earnings report. The total revenue reached approximately $140 million, with earnings taking center stage highlighting both the struggles and potential within the company. However, profitability metrics have raised eyebrows with an operating income posting a negative $2.46 million. These figures point towards operational challenges that the company faces, challenging its path to profitability.

In terms of cash flow, the company reported a negative change of $4.73 million, indicating significant expenditures and investments that are being funneled towards growth. The financial strength metrics reflect a complex picture: a high total debt to equity ratios stands at 3.51 with leverage ratio at 5.7, revealing the significant reliance on external debt.

Avid’s asset turnover, which measures the efficiency of the company in using its assets to generate revenue, is calculated at 0.4. This indicates the need for better efficacy and resource optimization. Despite these challenges, Avid Bioservices’ quick ratio at 0.8 and current ratio at 1.5 provide some cushion, reflecting the firm’s ability to cover its short-term obligations.

Impact of Recent Developments on Stock Movement

Avid’s acquisition news injected a considerable buzz into the stock market. The deal represents a 13.8% premium over its last closing price, immediately boosting investor confidence. But what does this mean for CDMO’s future movements?

Premium Acquisition & Market Response

The premium set in this acquisition deal implies a strong vote of confidence from the acquirers on the inherent value and future potential of Avid. This has inevitably stirred a positive sentiment across the shareholder community, raising anticipation for lucrative returns. Markets tend to respond favorably to such acquisitions, as they promise to drive enhanced growth prospects.

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Technological Synergy

Beyond the financial aspects, the acquisition brings a host of strategic synergies to the table. GHO Capital and Ampersand Capital’s involvement hints at new technological innovations and financial influxes that Avid could leverage. These unlock avenues for future expansion, providing the critical scale to compete more effectively within the biopharmaceutical landscape.

Projected Trajectory

The short-term market optimism is evident. As the acquisition deal progresses, the completion is expected to catalyze further stock price hikes. With analysts keeping a keen eye, the acquisition could very likely push CDMO shares higher than the promised $12.50 if investors anticipate extended growth and integration benefits. Continued positive reinforcement from operational improvements, fueled by this capital influx, might set CDMO on a trajectory of recovery and sustainable growth.

Conclusion

In essence, Avid Bioservices’ acquisition indicates promising horizons, marked by an alignment with strategic capital players. Though current profitability remains an area of concern, the financial backing and operational synergies introduced by this acquisition present a strong case for a robust future. Similarly, the market, evaluating these prospects, has initially rewarded CDMO by boosting shares to reflect the acquisition premium.

As Avid Bioservices navigates through this transitional phase, keeping a close eye on upcoming earnings and strategic milestones will be pivotal in measuring the ultimate success of this acquisition.

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Tim Sykes is a penny stock trader and teacher who became a self-made millionaire by the age of 22 by trading $12,415 of bar mitzvah money. After becoming disenchanted with the hedge fund world, he established the Tim Sykes Trading Challenge to teach aspiring traders how to follow his trading strategies. He’s been featured in a variety of media outlets including CNN, Larry King, Steve Harvey, Forbes, Men’s Journal, and more. He’s also an active philanthropist and environmental activist, a co-founder of Karmagawa, and has donated millions of dollars to charity. Read More

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The available research on day trading suggests that most active traders lose money. Fees and overtrading are major contributors to these losses.

A 2000 study called “Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors” evaluated 66,465 U.S. households that held stocks from 1991 to 1996. The households that traded most averaged an 11.4% annual return during a period where the overall market gained 17.9%. These lower returns were attributed to overconfidence.

A 2014 paper (revised 2019) titled “Learning Fast or Slow?” analyzed the complete transaction history of the Taiwan Stock Exchange between 1992 and 2006. It looked at the ongoing performance of day traders in this sample, and found that 97% of day traders can expect to lose money from trading, and more than 90% of all day trading volume can be traced to investors who predictably lose money. Additionally, it tied the behavior of gamblers and drivers who get more speeding tickets to overtrading, and cited studies showing that legalized gambling has an inverse effect on trading volume.

A 2019 research study (revised 2020) called “Day Trading for a Living?” observed 19,646 Brazilian futures contract traders who started day trading from 2013 to 2015, and recorded two years of their trading activity. The study authors found that 97% of traders with more than 300 days actively trading lost money, and only 1.1% earned more than the Brazilian minimum wage ($16 USD per day). They hypothesized that the greater returns shown in previous studies did not differentiate between frequent day traders and those who traded rarely, and that more frequent trading activity decreases the chance of profitability.

These studies show the wide variance of the available data on day trading profitability. One thing that seems clear from the research is that most day traders lose money .

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Citations for Disclaimer

Barber, Brad M. and Odean, Terrance, Trading is Hazardous to Your Wealth: The Common Stock Investment Performance of Individual Investors. Available at SSRN: “Day Trading for a Living?”

Barber, Brad M. and Lee, Yi-Tsung and Liu, Yu-Jane and Odean, Terrance and Zhang, Ke, Learning Fast or Slow? (May 28, 2019). Forthcoming: Review of Asset Pricing Studies, Available at SSRN: “https://ssrn.com/abstract=2535636”

Chague, Fernando and De-Losso, Rodrigo and Giovannetti, Bruno, Day Trading for a Living? (June 11, 2020). Available at SSRN: “https://ssrn.com/abstract=3423101”