Merger/Risk Arb

[Cunninghamew]

As of recent, it has been a rough go for a lot of the merger arb guys. I typically don't look at this stuff much, because it is not my expertise and the upside/downside is usually very unattractive. That said, spreads on a lot of the deals are very wide and wanted to know if anyone had any thoughts

 

I have purchased a few of these and in some cases have been able to buy puts on the stock as well that are struck just north of the pre-deal price. For example, I own TIBX along with Jan 2015 puts stuck at $21 - pre deal price was $19.5. I know this is a pretty crude way of looking, but I generally think of my downside if it busts as pre-deal price

 

TIBX  - all cash take out $24 expected end of year

MGAM - all cash take out $36.5 expected early 2015

EDS - all cash $1.78 - 3Q 15

BYI - all cash - $83.3 early 2015

 

 

Others of interest

 

LIN

COV

DTV

 

[Guest Schwab711]

As of recent, it has been a rough go for a lot of the merger arb guys. I typically don't look at this stuff much, because it is not my expertise and the upside/downside is usually very unattractive. That said, spreads on a lot of the deals are very wide and wanted to know if anyone had any thoughts

 

I have purchased a few of these and in some cases have been able to buy puts on the stock as well that are struck just north of the pre-deal price. For example, I own TIBX along with Jan 2015 puts stuck at $21 - pre deal price was $19.5. I know this is a pretty crude way of looking, but I generally think of my downside if it busts as pre-deal price

 

TIBX  - all cash take out $24 expected end of year

MGAM - all cash take out $36.5 expected early 2015

EDS - all cash $1.78 - 3Q 15

BYI - all cash - $83.3 early 2015

 

 

Others of interest

 

LIN

COV

DTV

 

It might make you feel better to know that nearly all major investment banks use the same assumption.