From: lessgovt@gmail.com   
      
   The Hedge Fund That Made a Killing Betting Against Lina Khan   
   By Caitlin McCabe and Ben Dummett, Sept. 24, 2023, WSJ   
   The efforts by Federal Trade Commission Chair Lina Khan to protect Main Street   
   are inadvertently enriching some on Wall Street, generating outsize profits   
   for Pentwater Capital Management and other large hedge funds that bet on   
   merger deals.   
      
   For the past two years, Khan has pursued an aggressive strategy as head of   
   Biden’s antitrust agency, attempting to block proposed deals including   
   Microsoft’s acquisition of videogame maker Activision Blizzard and Amgen’s   
   pursuit of drugmaker    
   Horizon Therapeutics.    
      
   In both cases, the FTC’s intervention spooked investors and sent shares of   
   the target companies swinging. This phenomenon complicated the playbook for a   
   group of hedge funds whose main strategy relies on wagering that mergers and   
   acquisitions will    
   succeed or fail.   
      
   Yet for a handful of firms willing to stomach the volatility, the FTC’s   
   antitrust efforts have yielded an unexpected windfall.   
      
   Their strategy? Betting big against Khan.   
      
   Florida-based Pentwater stands to be a large winner from the FTC’s recent   
   failed bid to block the Amgen-Horizon deal. It built a stake of almost 7% in   
   Horizon after the drugmaker began fielding takeover interest last year.    
      
   Pentwater is estimated to have scored around $100 million on its Horizon trade   
   on paper, according to an analysis of the hedge fund’s public filings. It   
   also holds stock valued at more than $1 billion in Activision and in Seagen,   
   the biotech company    
   that agreed to sell itself to Pfizer—and is betting that outstanding bids   
   for each of them will ultimately survive FTC and other regulatory scrutiny and   
   close successfully.   
      
   D.E. Shaw Group is also among the funds that stood their ground following the   
   FTC lawsuit against Horizon. The New York-based firm steadily increased its   
   position and currently holds more than $500 million in the shares, filings   
   show. Other funds that    
   bet on Horizon include Farallon Capital Management and HBK Capital Management,   
   according to public filings.   
      
   “Because of the FTC’s lawsuit, we have had the ability to take something   
   that would have made tens of millions of dollars and instead make many, many   
   times that amount,” said Matt Halbower, Pentwater’s chief executive.    
      
   Halbower, a Harvard Law School graduate with a degree in electrical   
   engineering from the Massachusetts Institute of Technology, launched Pentwater   
   in 2007, after stints at hedge fund Citadel and the now-closed Deephaven   
   Capital Management. His firm is    
   named after Pentwater, Mich., on the shoreline of Lake Michigan, near where   
   Halbower grew up and where he and his wife spent their honeymoon.   
      
   Pentwater last year scooped up shares of Twitter, now X, in a wager that Elon   
   Musk would ultimately acquire the company, and it was a vocal opponent of Rio   
   Tinto’s takeover of Turquoise Hill Resources, a Canadian miner.   
      
   Pentwater was also among the firms that committed to the private investment in   
   public equity, or PIPE, raised to take former President Donald Trump’s   
   social-media company public through a blank-check merger. (The deal hasn’t   
   closed, however, and    
   Pentwater ultimately hasn’t invested and likely won’t.)   
      
   Since its inception, Pentwater, which oversees close to $5 billion, has   
   averaged a net return of more than 11% annually, according to a person   
   familiar with the matter. By comparison, the HFRI Event-Driven Index generated   
   an annualized net return of 4.47%   
    from January 2007 through August 2023, according to research firm HFR.   
      
   Pentwater’s investment in Horizon started as it often does for M&A deals:   
   The hedge fund spotted a report in The Wall Street Journal—in this case, a   
   late-November article saying that the drug company was holding takeover talks.   
   Halbower’s aim was    
   simple: Pile in shares early, then profit if the acquisition closed and   
   Horizon’s shares rose to their agreed-upon deal price.   
      
   From late November through mid-May, Pentwater purchased more than seven   
   million shares in the drugmaker, constructing what Halbower said was his   
   largest risk position at the time. But Halbower was also monitoring what he   
   called a “difficult to predict    
   regulator”—the FTC.    
      
   Aware that the agency had moved to block Microsoft’s acquisition of   
   Activision, he bought bearish options contracts on Horizon’s stock, offering   
   Pentwater protection on its position in case the FTC were to intervene.   
      
   The FTC’s lawsuit arrived on May 16. As other investors rushed for the   
   exits, Horizon’s shares plunged nearly 20%. Pentwater’s options position   
   offered some protection, while Halbower began reading the FTC’s lawsuit. His   
   takeaway: Buy more shares.   
      
   “It was just clear from reading the complaint that the government wouldn’t   
   be able to prove its case,” Halbower said. “I was very surprised that the   
   FTC would bring such a weak case.”    
      
   In its lawsuit, the commission argued that Amgen could illegally bundle its   
   products with Horizon’s medicines for thyroid eye disease and gout to   
   entrench its dominance of the top-selling therapies.    
      
   Halbower believed the FTC argument was flawed because there was no precedent   
   and because Amgen had told the agency that it wouldn’t bundle Horizon   
   products. He added over two million shares at an average price of slightly   
   more than $93 each following    
   news of the FTC suit—and then kept buying.   
      
   Earlier this month, the FTC agreed to end its legal challenge of the deal as   
   part of a proposed settlement with Amgen, paving the way for the company’s   
   acquisition of Horizon to close as soon as next month.    
      
   Horizon’s shares finished Friday up 0.1% at $115.61—below Amgen’s   
   proposed $116.50 per share price—offering more upside for Pentwater’s   
   stake. Pentwater now owns more than 15 million shares in Horizon, according to   
   regulatory filings compiled    
   by research firm M&A Monitor.   
      
   The regulator defended its opposition to the Amgen-Horizon deal and the   
   resulting settlement.   
      
   “The FTC got extensive, binding agreements on all the concerns we raised,”   
   FTC spokesman Douglas Farrar said in an email. “The Amgen-Horizon settlement   
   is a legal victory for the FTC but more importantly, a big win for Americans   
   who need access to    
   affordable medicine.”   
      
      
   [continued in next message]   
      
   --- SoupGate-Win32 v1.05   
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