Thesis
Allergan (NYSE:AGN) will have the ability to sell 100M of Teva Pharmaceutical's (NYSE:TEVA) shares in August. Allergan acquired the shares when it sold Actavis Generics to TEVA. These 100 million shares represent approximately 10% of the total shares float. As you can see, this has the ability to create significant downward pressure on TEVA's share price, especially if we consider the average daily volume of the stock which stands at roughly 10 million.
This means it would take Allergan ten trading days to dispose of all their shares. Of course, the fact that Allergan can sell these shares doesn't mean they will. It is not outside of the realm of possibility that Allergan actually considers the shares undervalued. The reason I think this is not outside of the realm of possibility, is because I actually believe the shares to be undervalued. The caveat here is that management is not necessarily looking at whether the shares are undervalued.
