The biotech company Aptevo Therapeutics Inc. (APVO) closed in the green for four consecutive sessions from November 3 to November 6, 2020. The stock moved nicely from $8 into the high $20’s, giving investors a number of opportunities to participate in those gains along the way. The catalysts for these impressive moves included two promising news releases about one of the company’s cancer therapies.
We’ll browse Aptevo Therapeutics’ financial filings to determine the stock float and compare that number to our result using FloatChecker. A search of APVO indicates it is a very low float stock with between 2 million and 3 million shares available for trading.
- 1:14 Reverse Stock Split
- APVO 2020 Second Quarter Report 10-Q
- Beneficial Owners
- Schedule 13D Filing – November 2020
1:14 Reverse Stock Split
On March 26, 2020, Aptevo effected a 1-for-14 reverse stock split of the company’s outstanding shares. As explained in the February 11, 2020 proxy statement (Schedule 14A), the split was necessary for two reasons. First, the reverse split would raise the stock price in order to maintain the company’s listing on the NASDAQ marketplace. The NASDAQ stock exchange requires a stock to maintain a minimum price of $1.00. If the stock’s trading price falls below $1.00 for 30 consecutive business days, the company could be delisted from the NASDAQ. Second, the reverse split could improve the marketability of the stock because larger institutional investors and funds have policies that prohibit them from investing in low priced stocks. By raising the price, the stock could become more attractive to these investors.
Based on share information as of December 31, 2019, the reverse split reduced the outstanding common stock from 45,279,244 to 3,234,232 shares.
APVO 2020 Second Quarter Report 10-Q
Aptevo’s latest 10-Q filed August 14, 2020 reports a total of 3,232,811 outstanding shares for the period ending June 30, 2020. The reverse stock split resulted in 1,421 fractional shares that were “cancelled” or paid out in cash to stockholders. Fractional shares represent a slice or portion of a full share. The company likely paid those out in cash because fractional shares can be difficult for investors to sell. As a result, the outstanding stock reduced slightly to 3,232,811 shares. Not all of those shares will be part of the float.
Like many companies, Aptevo has a stock incentive plan that sets aside stock options and restricted stock units (RSUs) to reward employees. Stock options give an employee the right to buy the stock at a specified time in the future and at a discounted price. They are designed to reward employees that stay and work long term with the company. Options that are “outstanding” are shares that have not been “exercised” or purchased by the employee. Accordingly, these outstanding shares are not considered part of the stock float. Aptevo’s 10-Q shows 340,017 such outstanding shares as of June 30, 2020. Subtracting that number from the outstanding shares (3,232,811 – 340,017) leaves us with a stock float of 2,892,794 shares.
Restricted stock units (RSUs) are an additional form of stock-based compensation. RSUs can vest, or be earned, by an employee after a specified period of time or after some performance metric has been achieved. Unlike stock options, RSUs do not vest at a discounted price – rather, the value of the RSU will depend on the fair market value of the shares (i.e., the stock price) at the time of vesting. The second quarter 10-Q indicates 11,989 RSUs remain outstanding as of June 30, 2020. Subtracting that number from our prior calculation gives us a remaining stock float of 2,880,805 shares.
Next we’ll take a look at the beneficial owners of APVO, which include shareholders who own 5% or more of the stock. These shareholders are required to file a Schedule 13D/G ownership statement that sets out the purpose of their investment. In addition, these filings may set out any restrictions on these shares. The table below shows the recent beneficial owners as reported in the Schedule 14A proxy statement filed April 20, 2020.
Based on the table, 5 funds own approximately 40% of the outstanding shares. S.E.C. rules require these owners to file an amended Schedule 13D/G if their holdings change by more than 1%. The lack of such amended filings suggests the majority of these shares are still being held. While we would have to review each filing separately, the notes to the table in the Schedule 14A proxy statement do not indicate the shares are under any sale restrictions. The remaining insiders are officers and directors who collectively own over 10% of the outstanding shares. Although we can’t know for certain the effect these holdings have on the stock float, the relatively large insider holdings may have contributed to the recent volatility in the stock.
Schedule 13D Filing – November 2020
On November 6, 2020, the investment firm Tang Capital Partners filed a Schedule 13D to report a huge 1,760,000 investment in Aptevo, or approximately 54% of the outstanding shares. The filing states that the shares were bought for investment purposes at prices between $9 and $17. Combining these shares with other beneficial owners indicates that over 90% of the shares are held by large investors, and officers and directors. This Schedule 13D filing likely contributed to the continued move in APVO stock on November 6.
Finally, the second quarter 10-Q states that the company issued approximately 1,571,000 warrants in March 2019. Warrants generally give the holder the right to purchase shares at a specified target price before an expiration date. Here the 10-Q notes that the exercise target price was $18.20 with a 5-year expiration date. Because that price was met and exceeded starting on November 3, 2020, those shares could have been purchased and thus added to the stock float. But since the holder of the warrants has no obligation to purchase the shares, we will leave our float calculation at 2,880,805 shares.
Our final calculation of Aptevo’s 2.88 million share float falls within the range of the results returned by FloatChecker. The company’s low float almost certainly contributed to its recent gains, but it certainly wasn’t the only reason. The two press releases touting the positive results of Aptevo’s cancer trial got the attention of short-term and long-term investors alike. And then the large investment by Tang Capital Partners likely gave traders the confidence to continue the rally. Given these factors, investors may be looking for the gains in APVO to continue.