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Tetraphase: A Bidding War Shareholders Shouldn't Wait Around For

Bart van Velzen profile picture
Bart van Velzen


  • Shares in Tetraphase sky-rocketed yesterday after La Jolla announced a non-binding takeover proposal.
  • Tetraphase had already agreed to be bought by AcelRx in March.
  • A bidding war seems possible; La Jolla's offer likely needs to be raised.
  • However, investors don't seem to understand the value that's actually being offered by either party.
  • The current share price of Tetraphase vastly exceeds any realistic takeover consideration shareholders will, ultimately, receive.


Shares in battered biotech Tetraphase Pharmaceuticals (NASDAQ:TTPH) were yesterday's big winner in US trading, moving up 78% after La Jolla (LJPC) announced it had submitted a 22M non-binding all-cash proposal to acquire the company, plus an additional 12.5M in Contingent Value Rights.

This offer comes after Tetraphase already agreed to be acquired by AcelRx Pharma (NASDAQ:ACRX) in March of this year. AcelRx offered 14.4M in stock at the time and also added 12.5M in Contingent Value Rights to the mix.

Every investor loves a bidding war, right? This might explain why Tetraphase shares were aggressively bid up from a $1.35 close on Wednesday to a $2.42 close on Thursday. Intraday shares even traded at $3.50.

However, I'll argue investors are jumping the gun. The AcelRx offer and the La Jolla offer both represent a value that is much lower than the current share price. Even if either bidder raises its bid, it's not likely it will come even close to what Tetraphase is currently trading at in the market.

Comparing the bids

As you can see in the table above, La Jolla's offer is slightly better than AcelRx's offer but not by much. Because the share price of AcelRx has been performing very well lately, the value of its all-stock bid has increased from 14.4M mid-march to 20.8M today. La Jolla's bid is all-cash though, which is generally considered more valuable than an all-stock offer.

Another slight difference is AcelRx has the right to adjust its bid downwards if Tetraphase has less than 5 million dollars in net cash at the time of closing. Considering Tetraphase had over 26M in cash equivalents per the 31st of March and burns about 15M a quarter, that won't be an issue.

Value per share

The day-trading crowd went nuts yesterday trading Tetraphase

Source: Tetraphase 10-Q filings

This article was written by

Bart van Velzen profile picture
Investor trading for my own account. Blogging on avaritia.biz about (mostly micro-cap) special situations investing: merger arbitrage, tenders, and liquidations around the world. I publish some of my articles on Seeking Alpha, primarily the ones about larger, more liquid US-listed companies. Subscribe to my blog to read all my posts.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, but may initiate a short position in TTPH over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

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