The group of insider transactions we saw last week were an eclectic mix including insider buying in a recent spinoff (Biohaven), buying in a battered marketing software company (Braze) and buying in a SPAC (Chardan NexTech Acquisition 2) that acquired a lithium-ion battery supplier. Unlike most SPACs that drop sharply after a business combination with an operating company, this one not only held up above the $10 level, it appreciated significantly following insider buying.
We saw the same thing with “new” Biohaven, which saw its stock rise after the completion of the acquisition of “old” Biohaven by Pfizer. Following the acquisition, Pfizer decided to retain the migraine related drugs and spinoff the rest of the drug pipeline into a new company that retained the Biohaven name, its stock symbol BHVN, its Board of Directors and its CEO, Vlad Coric. The spinoff also received $258 million in cash and is entitled to royalty payments if the migraine related drugs Pfizer acquired exceed certain milestones ($5.25 billion in annual sales) as discussed in our May 2022 article about the merger and spinoff.
The probability of receiving royalty payments is low and insiders appear to excited by the pipeline prospects for the new Biohaven drugs that target epilepsy, pain and mood disorders, obsessive compulsive disorder (OCD), spinocerebellar ataxia (SCA) and spinal muscular atrophy (SMA). Pfizer will own a 3% stake in new Biohaven and it would not be surprising to see them invest more in the company as they did with their $350 million investment in the old Biohaven in 2021.
We also saw Warren Buffett’s successor and the Vice Chair of Berkshire Hathaway, Greg Abel, invest $68.33 million in its class A shares. Mr. Abel received $870 million in June after Berkshire acquired his stake in Berkshire Hathaway Energy. I had picked Berkshire Hathaway as my top pick for 2021 and despite the recent pullback, it is still up about 17% from those levels. I would not mind buying Berkshire at those levels again if I see the stock pull back an additional 10% to 20%. The stock currently trades for 1.3 times book value. Berkshire used to buyback its stock when it dipped below 1.2 times book value before abandoning that metric. Book value for Berkshire Hathaway is likely understated considering the large number of operating businesses it owns that are not public companies.
Welcome to edition 640 of Insider Weekends. Insider buying increased last week with insiders purchasing $110.88 million of stock compared to $39.43 million in the week prior. Selling also increased to $499.74 million compared to $238.37 million in the week prior.