Thursday, March 12, 2009

It Is Time to Sell Genentech (DNA)

Today, Roche announced that it reached an agreement to buy the 44% of Genentech (DNA) that it does not already own, increasing its bid to $95 a share to close the deal.

Roche first tried to take over Genentech last July, bidding $89 a share, raising it to $93 a share last week. However, Gentech’s directors rejected that offer, saying that Goldman Sachs (GS) valued the stock at $112 a share.

But now that an agreement is in place, what do you do?

My philosophy is to always sell a stock of a company that is being taken over, simply because deals can fall apart, and you do not want to be left holding the bag when that happens.

Just look at what happened to holders of Take-Two Interactive (TTWO). Or Harman (HAR). Or Yahoo! (YHOO). Wall Street analysts tend to slap hold ratings after a stock receives a takeover bid, but that makes no sense to me.

Take the money and run. Genentech is trading at about $94 right now. Don’t wait for $95, especially when there are other quality stocks on sale right now.

Read more about why you should not play the arb game with your own money.


Matt said...

I had 2 shares of Genentech in a USAA Roth IRA, and now I don't???What happened to my money? My Shares?

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