Ian L Posted October 13, 2016 Share Posted October 13, 2016 Salesforce has complained to the European Commission about the deal and asked them to block it or put conditions onto the deal. It seems that the odds are against them doing anything but maybe that could explain some of the discount. Have you looked into that? Link to comment Share on other sites More sharing options...
ValueMaven Posted October 13, 2016 Share Posted October 13, 2016 Yes - makes little sense, but you are right...the deal is already approved in the US. Link to comment Share on other sites More sharing options...
ValueMaven Posted October 14, 2016 Share Posted October 14, 2016 CRM drops its bid for TWTR... You wonder if CRM will attempt to go after LNKD... I doubt it...but who really knows with Benioff running things... LNKD is still a very decent 'mega-cap' arb situation going into year end Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 14, 2016 Share Posted October 14, 2016 CRM drops its bid for TWTR... You wonder if CRM will attempt to go after LNKD... I doubt it...but who really knows with Benioff running things... LNKD is still a very decent 'mega-cap' arb situation going into year end Sincerely, ValueMaven Worst case scenario is CRM buys TWTR and the LNKD deal falls through. Though the odds of both those occurring is pretty low I would imagine. Maybe ~5%? And if it happens, not like LNKD is worthless (though not a stock I'd really want to hold). So let's say it drops ~$40/share. Assuming that, pretty positive expected value... ($6 * .95) + (-$40 * .05) = 3.70 Link to comment Share on other sites More sharing options...
writser Posted October 14, 2016 Share Posted October 14, 2016 Slightly off-topic, but Benioff: the go-to guy if you got swindled by a mayonaise company and need to sell your shares. Good read. Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 14, 2016 Share Posted October 14, 2016 I don't like the Graham positive expected value formula as it doesn't cater to position sizing and consequences of the larger downside with smaller probability. I would much rather tie a large negative outcome with small probability to an appropriate investment size that is comfortable. Having said that, my base case scenario is EU extends 120 days but we'll see if US-EU relations warm up a bit, they've been pretty tense lately. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 14, 2016 Share Posted October 14, 2016 I don't like the Graham positive expected value formula as it doesn't cater to position sizing and consequences of the larger downside with smaller probability. I would much rather tie a large negative outcome with small probability to an appropriate investment size that is comfortable. Having said that, my base case scenario is EU extends 120 days but we'll see if US-EU relations warm up a bit, they've been pretty tense lately. Haha I wasn't even aware I was using a Graham formula.. thought it was just regular math. I'm pretty inexperienced with arb, so can you explain a bit more what you mean by "tie a large negative outcome with small probability to an appropriate investment size that is comfortable"? Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 14, 2016 Share Posted October 14, 2016 Just intuition but if a 1 in 20 chance of losing 'x' amount is painful, despite being unlikely, then buy 2 shares instead of 200, or some figure in-between. I think there was a Kelly formula but not sure how it applies to arb. Also I think Graham and some of his disciples talk about doing arb with a diversified portfolio, whatever that number is 5 or 10 should be somewhat safer than 1 or 2. I try to study arbs and the safest ones for me have been all cash deals in boring manufacturing or financial industries with domestic operations or few controversial anti-trust issues. Strategic over financial deals...A committed, willing management on both sides usually without hedge funds involved...enough cash to do the deal...You don't always find the sweet spot though..I think LNKD merger could be a good one at the right point. Link to comment Share on other sites More sharing options...
Jurgis Posted October 14, 2016 Share Posted October 14, 2016 Kelly's definitely applies to arb. That's what Thorp used it for. But it probably won't help you with this. Assuming 2.8% gain on approval, 95% chance of approval and 21% loss on cancellation, Kelly's tells you to leverage your bankroll 2.7x. :) Of course if the approval chance drops to 90%, then Kelly's becomes 70% of your bankroll. In general, if your loss outcome is not 100%, Kelly's is very aggressive. Link to comment Share on other sites More sharing options...
ValueMaven Posted October 14, 2016 Share Posted October 14, 2016 Who knows...anything is possible with CRM pulling out of TWTR. CRM did already try to bid for LNKD...Sources said LinkedIn was already deep into negotiations with Microsoft when Salesforce made its approach, which would have required both debt and stock financing. Microsoft was able to buy LinkedIn in cash and also promised to let it operate independently. Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
ValueMaven Posted October 15, 2016 Share Posted October 15, 2016 I dont think 95/5 are fair odds... I think its more like 99/1 actually... Both boards already agreed to the transaction, DOJ has approved it, and MSFT already has the $$... Plus, LNKD's latest earnings etc has been fairly impressive...Plus there is a strong trend in the market for 'data' I put little downside probability here, particularly into CRM's noise Just some thoughts.... Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 15, 2016 Share Posted October 15, 2016 It reminds me a bit of that Buffett statement if there was a 1 in 100 chance of us being uncomfortable...:) But I agree with you, except I see the europeans being nasty and extending. It is that extension which is more like 60/40. If that extension hits the price, then the arb today's return is reduced and a new arb position can be opened later. If the extension does not occur, you lose out on the 2.9% gain today. It's a tough call. I'd be more inclined to look at the odds as 2 phases - .99 * .6 or 59% to close by Dec 31 and 99% to close overall. Link to comment Share on other sites More sharing options...
ValueMaven Posted October 17, 2016 Share Posted October 17, 2016 The European Commission has set a Nov. 22 deadline to examine the case. The EU competition authority can either clear the deal with or without concessions or it can open a lengthy investigation if it has serious concerns... Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
ValueMaven Posted October 18, 2016 Share Posted October 18, 2016 Interesting, LNKD is Bill Gross's second largest position in his unconstrained fund (as of 9/30), and now that the SABMiller deal went through, assuming no change in the portfolio, LNKD is likely the largest single position in the fund. SAB was ~5.5%, so an educated estimate would be LNKD is around 4% to 5%, knowing how he generate constructs his portfolio https://www.janus.com/advisor/funds/janus-global-unconstrained-bond-fund/holdings-and-details Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 18, 2016 Share Posted October 18, 2016 Interesting, LNKD is Bill Gross's second largest position in his unconstrained fund (as of 9/30), and now that the SABMiller deal went through, assuming no change in the portfolio, LNKD is likely the largest single position in the fund. SAB was ~5.5%, so an educated estimate would be LNKD is around 4% to 5%, knowing how he generate constructs his portfolio https://www.janus.com/advisor/funds/janus-global-unconstrained-bond-fund/holdings-and-details Sincerely, ValueMaven If you click on "Full Holdings" it seems to be a smaller stake. Not sure which presentation to believe though Link to comment Share on other sites More sharing options...
ValueMaven Posted October 18, 2016 Share Posted October 18, 2016 Full Holdings are as of 6/30 As of 9/30 they are showing just Top 10 positions Hope that helps Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
ValueMaven Posted October 20, 2016 Share Posted October 20, 2016 In a leaked hack of Collin Powell’s emails, a recent presentation shows that CRM was in advanced conversations about acquiring LNKD, before MSFT bought the company out. I am keeping this thread active with analysis, as I view the LNKD arb as very attractive, particularly given the 3% spread, and the European Commission Nov 22nd deadline for approval. Once approved, the spread will compress, and the deal close by end of the year at $196 per share. CRM is arguing that the MSFT/LNKD deal is unfair…seems ridiculously ironic as CRM was basically TOO SLOW to bid for the company itself… Thoughts are most welcome Sincerely, VM Link to comment Share on other sites More sharing options...
Phaceliacapital Posted October 20, 2016 Share Posted October 20, 2016 Maybe this helps: https://www.sec.gov/Archives/edgar/data/1271024/000110465916130837/a16-14187_1prem14a.htm#BackgroundoftheMerger_090652 So CRM wasn't too slow, On June 5, 2016, LinkedIn received a further revised proposal from Party A for an acquisition of LinkedIn at a price per share of LinkedIn common stock of $85 in cash and a fixed number of shares of Party A common stock, which fixed number of Party A shares was increased from Party A’s May 20, 2016 proposal. Based on the closing price of Party A’s common stock on June 3, 2016, the last trading day prior to receipt of the proposal, this proposal represented a notional value of approximately $200 per share of LinkedIn common stock at that time. Also in the morning of June 11, 2016, Mr. Nadella informed Mr. Weiner that Microsoft’s board of directors had approved a revised proposal for an acquisition of LinkedIn at a price of $196 in cash per share of LinkedIn common stock and that Microsoft wanted to finalize and execute th Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 22, 2016 Share Posted October 22, 2016 Have you found any instances where the EU blocked a merger where: 1) two US companies were involved 2) or it was already approved by US regulators (Other than the GE/Honeywell deal in 2001)? I can't find any other examples. Link to comment Share on other sites More sharing options...
gfp Posted October 24, 2016 Share Posted October 24, 2016 wsj has an article on the EU's questions today: http://www.wsj.com/articles/eu-sent-questionnaires-about-microsoft-linkedin-deal-to-rivals-1477144129 Link to comment Share on other sites More sharing options...
scorpioncapital Posted October 24, 2016 Share Posted October 24, 2016 Is Microsoft likely in the case where they are asked to allow multiple 3rd party data access to everyone - like an API, to still consummate the deal? I.e. was it a major part of the price they offered to have exclusive access or it is something that probably wouldn't derail the deal? Link to comment Share on other sites More sharing options...
SlowAppreciation Posted October 24, 2016 Share Posted October 24, 2016 Is Microsoft likely in the case where they are asked to allow multiple 3rd party data access to everyone - like an API, to still consummate the deal? I.e. was it a major part of the price they offered to have exclusive access or it is something that probably wouldn't derail the deal? LNKD does have an API, though there are restrictions on what data is accessible, and also how much/frequently it can be accessed. Not sure if it's a factor in the deal being consummated or not. Link to comment Share on other sites More sharing options...
SlowAppreciation Posted November 16, 2016 Share Posted November 16, 2016 http://www.reuters.com/article/us-linkedin-m-a-microsoft-eu-idUSKBN13B0SO Link to comment Share on other sites More sharing options...
ValueMaven Posted November 26, 2016 Share Posted November 26, 2016 Deal is basically closed, and LNKD is now trading around $195... Great debate on the board - with a fairly decent IRR! Sincerely, ValueMaven Link to comment Share on other sites More sharing options...
shalab Posted November 26, 2016 Share Posted November 26, 2016 Good one - I think the concessions are reasonable and Trump win made the challenge all the more unlikely. Deal is basically closed, and LNKD is now trading around $195... Great debate on the board - with a fairly decent IRR! Sincerely, ValueMaven cheers! shalab Link to comment Share on other sites More sharing options...
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