A Canadian hedge fund doubled its stake in a tiny biotech that demonstrated promising results in a study that used a former Sanofi drug called Ifenprodil to treat idiopathic pulmonary fibrosis and chronic cough. Find out the name of the company and why one analyst has given it a 12-month CA$25 target price — a 560% increase from the unit price in its recent placement.
Buoyed by the strength of a 150,000-share lead order from Toronto-based hedge fund AlphaNorth Asset Management.
The deal makes Vancouver-based Algernon a top 20 holding for AlphaNorth, and effectively doubles its position in the tightly held company to about 13%, bolstering its position as Algernon’s largest shareholder.
‘With this placement (Algernon) will be going well into the top 20 (positions in the fund). I wanted to have it in the top 20 because it’s a higher conviction name.’ — AlphaNorth Asset Management Founder and Chief Investment Officer Steve Palmer
AlphaNorth now owns 307,610 common shares.
Before the placement, there were slightly less than 2 million shares outstanding, making the company a noteworthy target for value investors.
“It’s currently not in the top 20 but with this placement (Algernon) will be going well into the top 20 (positions in the fund). I wanted to have it in the top 20 because it’s a higher conviction name, but it’s also not the most liquid security, so it wouldn’t make sense for it to be among our top three names,” AlphaNorth Founder and Chief Investment Officer Steve Palmer told Streetwise Reports.
He added: “It’s very timely because you’ve not only got Algernon with company-specific fundamentals, but you’ve also got the backdrop of the biotech sector that’s improving.”
Even before the placement, Palmer says AlphaNorth was buying in the open market on the dips. “I was using the weakness as an opportunity to pick up a bargain and trying to buy in the low CA$3 range,” Palmer explained.
Each unit in the placement was priced at CA$3.75 apiece and consisted of one common share, plus a warrant at a strike price of CA$4.25. The warrants are good for up to 5 years from the date issued.
Algernon, however, reserved the right to accelerate the expiry date of the warrants if the volume weighted average price of AGN exceeds CA$12.75 for 20 straight trading days.
If that happens, Algernon has 10 days to issue an acceleration notice to warrant holders and those holders would then have 30 days to either exercise their warrants or watch them expire.
All the securities issued in connection with the closing of the private placement must be held for at least 4 months, plus a day, from the date the securities were issued.
Technical Analyst Clive Maund put out a note after news of the placement broke.
“The case for buying Algernon here could scarcely be stronger, and it is therefore considered…
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