PhreeZone 20 #1 August 16, 2007 I've got a question I just can't seem to figure out here and its driving me crazy. Say a publicly traded company is getting bought out by a private company and the new company has agreed to purchase them for $85 a share. The Board of Directors has approved it and so has the share holders with the deal to close some time in Q4 (no exact date mentioned). There are a few shareholder lawuits out there trying to prevent the merger but it looks like they might just be paid off. The stock is trading at say $70 a share now and is falling fast (about $1 a day). My questions is how is it not a safe bet to make $15 a share if you buy now and hold until the merger? Is the price falling since investors think the merger might fail and not pay out at $85? Hell, any one know any other forums to go ask this at to get even better adivce? Yesterday is history And tomorrow is a mystery Parachutemanuals.com Quote Share this post Link to post Share on other sites
livendive 8 #2 August 16, 2007 Is there some good reason to believe that Company B isn't be buying every single share that is being sold at $70 (and below)? They'll only have to pay $85/share for the shares they don't already own (or they'll have to pay themselves for those shares). Blues, Dave"I AM A PROFESSIONAL EXTREME ATHLETE!" (drink Mountain Dew) Quote Share this post Link to post Share on other sites
Clownburner 0 #3 August 16, 2007 Sounds like you've hit the nail on the head - the price is dropping because the shareholders are bailing out on the premise that the deal won't go through at all - and if it doesn't, they probably expect the company to have serious issues. So is it a 'safe' bet? Well, nothing is ever certain... The best stock market advice I ever got: "Pigs get fat, but hogs get slaughtered."7CP#1 | BTR#2 | Payaso en fuego Rodriguez "I want hot chicks in my boobies!"- McBeth Quote Share this post Link to post Share on other sites
PhreeZone 20 #4 August 16, 2007 I thought about that too but the volume trading seems to about about normal and the target of the buyout company already owns 81% of the outstanding shares due to buy backs when it was at $35-40. It seems that you sould still be able to buy a few hundred shares and cash in on a quick buck but there has to be something I'm missing...Yesterday is history And tomorrow is a mystery Parachutemanuals.com Quote Share this post Link to post Share on other sites
Clownburner 0 #5 August 16, 2007 Shareholder lawsuits pending is plenty reason enough - right now the whole market is skittish. But there could be industry-specific issues too - for example, if this is a mortgage company, 7CP#1 | BTR#2 | Payaso en fuego Rodriguez "I want hot chicks in my boobies!"- McBeth Quote Share this post Link to post Share on other sites
skydvr808 0 #6 August 16, 2007 Another potential hangup is if the target is being acquired by a PE firm which it was trying to fund a large piece with debt, the debt markets aren't very friendly now which would increase the probability that the deal won't close. Many of my deals have died in the past few weeks because of the poor debt market and some deals that were signed, closed with bridge debt rather than the debt structure originally planned. At the end of the day, seems the market is pricing in a probably of a deal not getting done. Quote Share this post Link to post Share on other sites
