The small cap stock ACOR recently traded higher on news that the company met certain milestones to receive a $15 million payment under its licensing agreement with Biogen International GmbH. Acorda Therapeutics, Inc. is a biotech company that develops therapies for several neurological disorders such as multiple sclerosis (MS) and Parkinson’s disease. The milestone payment news, combined with the stock’s low price, made it an attractive target for day traders.
We’ll go through Acorda’s financial filings to determine the number of shares in the float and compare it with the results from FloatChecker.
A search on FloatChecker tells us the float of ACOR is somewhere between 42 million and 47 million shares:
- Acorda’s Quarterly Report 10-Q
- Stock Options – Restricted Shares
- Prospectus – Form S-3 Registration Statement
- Beneficial Owners – Proxy Statement
Acorda’s Quarterly Report 10-Q
On August 7, 2020, Acorda filed its 10-Q for the quarter ending June 30, 2020. On the first page the company reports 47,979,115 outstanding shares as of July 31, 2020. Later in the “Consolidated Balance Sheet” and the “Consolidated Statements of Changes in Stockholders’ Equity,” the balance of outstanding shares is reported as 47,734,146 for the period ending June 30, 2020. We’ll use this latter number to continue with our float calculation.
On the Consolidated Balance Sheet, Acorda also identifies 29,304 shares held in the treasury. Treasury stocks are shares that the company has purchased and are no longer available for trading on the open market. In other words, those shares are not part of the float. Subtracting those shares from the outstanding balance gives us a float of 47,704,842 shares.
Stock Options – Restricted Shares
ACOR’s 10-Q includes a table of stock option activity for the period ending June 30, 2020. The table shows that several million shares vested and became exercisable, but no shares were actually exercised.
The term “vest” or “vesting” means that certain conditions have been met such that the stock can now be purchased, or “exercised.” For stock options, when an employee begins working, she may have been given an option (which is like a contract) to purchase the stock at an agreed upon price at a future time – say 3 years for example. Once that 3-year limit is met, the employee can decide to purchase (or exercise) the stock or hold on to the option in hopes that the price of the stock will go up. If the stock never gets above the agreed upon price or the employee quits early, then the option may be cancelled or forfeited.
Acorda’s 10-Q has a similar table for restricted stocks and performance stock units. These types of stocks are typically issued to managers and executives if they meet predefined performance goals. Restricted shares can behave more like options and be tied to a specific time period rather than a performance metric. In any event, the table shows that 4,000 such shares have vested, but there is no indication that the shares have been exercised.
As a result, our calculation of the float remains at approximately 47.7 million shares.
Prospectus – Form S-3 Registration Statement
In September 2020, the company filed a prospectus and registration statement for the sale of up to 158,408,779 shares of common stock of ACOR. The prospectus explains that the shares “are issuable upon the conversion of or payment of interest with respect to our 6.00% Convertible Secured Senior Notes due 2024.” The filings indicate that Acorda has $276 million in debt due by December 2024. But instead of going bankrupt trying to pay that debt and interest with cash, the company can issue shares at $3.50/share to settle the debt. Accordingly, we don’t expect this share registration to affect the outstanding shares or the shares available for trading until 2024.
Beneficial Owners – Proxy Statement
Finally, we thought it might be useful to look at the beneficial owners table in the company’s recent Schedule 14 proxy statement. The proxy statement is usually sent out to shareholders before an annual meeting or special meeting to inform them about matters that require a vote.
The proxy statement filed July 6, 2020 shows the beneficial owners of over 5% of ACOR common stock:
As the table shows, these shareholders collectively hold 22,749,674 (or 47.4%) of the common stock of Acorda. Beneficial owners are required to file either a Schedule 13D or 13G ownership report which sets out the purpose of their investment and any potential restrictions on the shares. While we haven’t reviewed these beneficial ownership reports, the notes to the above table do not suggest these shares are restricted. As a result, we will consider them as part of the float that can be openly traded. However, if any of the beneficial owners sell more than 1% of their shares, then an amended Schedule 13D/G report would have to be filed. The absence of such a recent amended filing could suggest that the shares are being closely held. In that case, we might expect that the stock of ACOR would trade more like a stock with approximately 25 million shares in the float (47,704,842 shares minus 22,749,674 shares). But we would have to look more closely at the beneficial owner filings.
Our analysis of Acorda’s filings appears to be close to the results we got from FloatChecker for FinViz, TD Ameritrade and The Wall Street Journal. The float results from Yahoo Finance and Morningstar are a bit lower by several million shares. The variance may be due to differing interpretations of stock options and restricted shares. Interestingly, nearly half of the common shares are held by 5% beneficial owners. If those shares are closely held and not traded frequently, we might expect another volatile trading session similar to other lower float stocks.