Earlier today, we wrote an update on Synergy Pharmaceuticals Inc (NASDAQ: SGYP). The stock saw some strong gains in the pre-market this morning as it bounced back from losses yesterday. However, these gains seem to be leading to buyout rumors. I was first alerted to this by traffic on CNA Finance leading to an old SGYP buyout rumor. After digging in, I’m seeing chatter on social media that some investors believe that an acquisition may happen. Well, I’m here to tell you that’s not the case. Today, we’ll talk about:
- The rumor;
- what SGYP needs to accomplish in order to recover from recent declines; and
- what we’ll be watching for with regard to the stock ahead.
A SGYP Buyout Isn’t Going To Happen
As mentioned above, Synergy Pharmaceuticals isn’t likely to see an acquisition no matter how bad investors want it to happen. That became clear on Friday when the company provided a business update. In the update, SGYP said that previous attempts to sell the business had failed as it had not received any offers that it would consider to be reasonable. Between Friday and today, I doubt that anything has happened to change this. So, if you’re looking for acquisition news, I’m sorry to disappoint, but it’s not likely to happen.
The real story with regard to SGYP has to do with its credit agreement with CRG. Under the terms of the agreement, the company needs to produce just over $61 million in sales from TRULANCE in the year 2018, a goal that the company is on track to miss in a big way. Should this goal be missed, the company will have to make a payment in March of next year that it doesn’t have the money to make. So, insolvency is a concern.
The only rela hope here is that the company will successfully renegotiate the agreement with CRG. If it is unable to do so, the next big topic of conversation will be a potential bankruptcy or a highly dilutive transaction. Either way, it doesn’t look good so, let’s hope for a successful renegotiation of the agreement.
What We’re Seeing From The Stock
While the buyout rumors circling around Synergy Pharmaceuticals are clearly invalid, they seem to be leading to excitement. This, combined with the more than 60% losses seen on the stock Friday is leading to some tremendous gains. As is just about always the case, our partners at Trade Ideas were the first to alert us to the gains. Currently (10:40), SGYP is trading at $0.50 per share after a gain of $0.072 per share or 16.63% thus far today.
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What We’ll Be Watching For Ahead
Moving forward, the CNA Finance team will continue to keep a close eye on SGYP. In particular, we’re interested in seeing just how high investors push the stock on hopes of a buyout that’s not going to happen. We’re also tracking TRULANCE sales incredibly closely as well as the continued negotiations with CRG, both of which aren’t going well at the moment, but any positive update may lead to serious gains. Nonetheless, we’ll continue to follow the story closely and bring the news to you as it breaks!
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