Pharmasett advice

[Queenie]

Hi everyone and Happy 2012!

I need some advice as this is waaaay out of my league of knowledge. I had purchased on a dollar cost averaging basis some Pharmasset stock (VRUS) and since they are being purchased by Gilead, Inc I have been approached to sell my shares to them at $137 per share.

Now I am inclined to do so as I feel that although I have more than doubled my investment since August that a good thing can't be good forever. I also feel like maybe with my limited knowledge I should count my blessings and sell. I really don't think I have any business in there playing with the big boys. Heck, I could use that profit for something special, although I don't really have anything "special" I want to do right now...

VRUS is going up steadily though (again)... am tempted to sell half which would bring me a profit from my initial investment anyway and just leave the other half and see what happens. Mind you, this investment I always considered my "allegria" account, it has no bearing on my fixed fund investments and would not have any detrimental effect on my lifestyle should I lose it all... only on my pride.:cool smiley: I bought this stock particularly because of their research into HCV and because it was such a small company with a very good product. Now it is being eaten up, so my motives are no longer valid, but I do like the profit!

What would you do in my shoes? Hope I have given enough info for others to comment.

Queenie

 

[MichaelB]

Hi Queenie. Is this stock held in a taxable account or is it tax deferred? If taxable, have you held it over 1 year?

 

[Queenie]

Hi Queenie. Is this stock held in a taxable account or is it tax deferred? If taxable, have you held it over 1 year?

Taxable, everything I have is taxable. Have had these stocks less than than a year, way less.

Thanks!

 

[MichaelB]

Ouch. You're going to give up a big chunk of that gain in short term capital gains tax. Are you concerned that your overall allocation to equities is too high, that you have too much money invested in one stock, or are you just looking to cash in the profit?

 

[Queenie]

Thanks for your reply, Michael. I am just wary from lack of experience, I guess. I didnt ever expect to be approached to sell and I guess in a panic. This investment is outside of my core portfolio. A bit of mad money I had. Just got a bit of cold feet.

Queenie

 

[MichaelB]

I assumed you would have the option to receive shares - my mistake. Never assume.

Some more information. You have a tender offer. Gilead is looking to buy Pharmasset for $138 a share, and sent this offer to every stockholder. The stick is trading right now for $130, so some traders do not expect it to happen but do seem to think another offer will present itself to keep the price of this stock near the level it is at now. If Gilead were to give you shares, this would not be considered taxable until you sold them. With cash, however, you are taxed on this whether you like it or not. By not taking the tender offer you are speculating that this deal will not happen and you are better off holding. The premium is pretty big, so who knows how long it would take to get back to that price.

In this case, you are probably better off accepting the tender offer, pay the taxes, and invest your gains elsewhere. BTW, good job investing in Pharmasset.

 

[Queenie]

Thanks again, so sell it is. Consider the investment just a bit of beginners luck. I wonder if the money is reinvested in a timely matter would I still have to pay capital gains?
Queenie

 

[MichaelB]

Thanks again, so sell it is. Consider the investment just a bit of beginners luck. I wonder if the money is reinvested in a timely matter would I still have to pay capital gains?
Queenie

You will have to pay tax on short term capital gains no matter what you do with the money.

 

[2soon2tell]

Sell the number of shares to get back your original principal plus the tax on the st capital gain. If you like the new company keep your remaining shares for at least 1 yr.

2soon2tell.