Mergers can be tricky business. Hoth Therapeutics (NASDAQ:HOTH) found out just how tricky when plans emerged to merge it with Algorithm Sciences. Shareholders were not at all happy about that, taking Hoth shares down as much as 17% before rallying to a loss of just under 9% at the time of writing.
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The letter of intent between the two firms shows that Hoth shareholders will own about 14% of the combined company. Algorithm Sciences, meanwhile, will not only retain the lion’s share of ownership at 86% but will also have the name. The combined company will be called Algorithm Science, a move that effectively eliminates Hoth Therapeutics. If such a move sounds remarkably unfair to you, then you’re not alone. Investor rights law firm Halper Sadeh LLC is currently investigating the move to see if it’s actually somehow fair to shareholders.
The letter of intent also spells out new positions within the combined firm. The current CEO of Algorithm, Mike Tilton, will continue to be the CEO of Algorithm once Hoth is basically folded into its operations. Meanwhile, David Cavalier will be the combined company’s CFO. Finally, Anthony Zook—Algorithm’s board chairman—will be nominated to continue as Algorithm’s board chairman. Robb Knie, Hoth’s CEO—though not for much longer, apparently—noted that this was “…an exciting chapter for Hoth and its shareholders.” Knie noted that this move meant “…additional billions of dollars in market opportunity for current shareholders.”
A look at the last five days in trading shows that HOTH stock was already on a downhill slope. There was one impressive spike earlier Wednesday, but that faded almost as quickly as it appeared. Hoth shares then attempted to rally but still sell at less than they did yesterday.
