Note: post-merger closing, SYRS has effected a 10-to-1 reverse stock split. Only by the end of the day the spread was finally eliminated. After the vote SYRS issued an announcement stating that the merger will close the next day but the spread persisted and even increased slightly to 10%. As expected, shareholder approvals were received on the 15th of September and the merger closed a day later.Īs further proof of market inefficiency in these types of situations, the spread still persisted even after the shareholder approval. The PIPE financing for an additional $130m from the largest shareholders at a premium to the market prices added further confidence that every single party of the transaction wants this to close successfully. Shareholder approvals seemed guaranteed as around 35% of SYRS and 30% of TYME shares had already been in support. The buyer openly stated that it was interested solely in TYME's net cash position ($60m) to enhance its liquidity and indicated that TYME's existing drug development program will be put on hold. The merger was basically an equity raise for SYRS. The spread on SYRS / TYME merger seemed completely overblown given the short expected closing timeline, persistently cheap SYRS hedging fees and very low risk of merger termination. We love these types of opportunities and covered these regularly on Special Situation Investing. So in the end we concluded that this is one of those micro-cap merger arbitrage situations where the market is simply not paying attention and our research actually gives us an edge.
Note: You can easily skip to the next section as this one only looks at a strange market inefficiency in these types of situations.ĭespite our attempts to find an explanation for this wide 20-40% spread, we could not find anything. Now that the merger closed, one can no longer acquire TYME stock with hopes it will convert to SYRS, but luckily enough SYRS is now itself trading materially below the levels of the merger announcement, presenting an equally attractive opportunity as was acquiring it through TYME. The merger arb aspect of the transaction has now fully played out, but there is another angle to the story.Īnother angle of TYME / SYRS transaction is that SYRS is a very well-positioned pharma company with an attractive development portfolio and this merger simply was an opportunity to acquire SYRS at 20-30% discount to the prevailing market prices by buying it through TYME. Although such a wide spread on a merger with limited risks might seem too-good-to-true, we actually spot similar opportunities quite often in the less analyzed microcap space and cover them on our premium service Special Situation Investing. Pure merger arbitrage play - pretty much till the closing the spread on the merger stood at 20-40% (chart below) and we could not see any real risks in this transaction despite our best efforts to dig something out. This opportunity attracted our interest purely from the merger arb perspective but it actually had two angles to it (with the second one being the key point of this article): The merger between Syros Pharmaceuticals (SYRS) and Tyme Technologies (TYME) was announced in the beginning of July and closed last Friday. SYRS now trades materially below net cash while being fully funded to bring development programs to fruition. SYRS share price has just declined by 17%, presenting an attractive entry point. This strong vote of confidence from insiders makes SYRS very interesting, especially when shares are below insiders' entry price. The sole purpose of the merger was to acquire TYME's cash balance.Ĭoncurrently with the merger, the largest shareholders put in an additional $130m into the company at over 30% premium to current prices. Syros Pharmaceuticals has recently acquired its peer Tyme Technologies. Syros Pharmaceuticals: A Major Vote Of Confidence From Insiders