| Related sites for http://www.ArbitrageView.com |
| Bombay_Stock_Exchange_Daily_Stock_Market_Report Daily stock tips and technical analysis for the Indian stock market. BSE and NSE exchanges. | | Bse_Nse_Daily Weblog covering daily news and market Summary of Bse and Nse stock exchanges of India. Free research reports on IPOs and tips for Indian stock markets. | | Bull_Rider Indian stock market trading tips, stocks futures, delivery, intraday tips. | | Bull_Ringer Investment advice, annotated stock charts, business news analysis, and stock opinions. | | Bursa_Trading_Ideas Articles to help your investment foundations for the KLSE as you cash-in on your well established knowledge together with other ideas for the Malaysian market. | | CFD_Spy Keep an eye on the markets with CFD Spy. Enjoy live trading news, online CFD & FOREX broker reviews, our 24/5 trading blog and much more. | | Cool_Stock_Picks Comparison of popular stock pick portfolios. | | The_Davidson_Reports Stock market news letter that covers all areas of the U.S. markets and international stock markets from stocks, bond, mutual funds, CD's, money markets, ETFs, and ADRs. | | The_Disciplined_Investor Stock, bond, and mutual fund advice and commentary. | | Dividend_Detective Rates dividend-paying stocks based on current dividend yields, risk, and expected dividend growth. Offers free dividend stock selection tutorials and free list of 800 high-dividend stocks. | | Dividend_Screener Provides dividend paying stock information related to: yield, rate, ex-dividend date, history and charting among others trading on the NYSE, NASDAQ & AMEX stock exchanges. | | Dividend_Stocks Free dividend stock information and tips. | | Earth_to_Wall_Street A business and finance blog that features the work of various members and contributors. | | Energy_and_Capital Offers news and commentary on the energy sector as well as ways to profit from the global energy crisis, peak oil and alternative energy. | | Financial_Market_Research Financial market research site that provides a proven stock picking strategy. | | Fit_Stocks Subscription based growth stock investment newsletter. Stock picks with fundamental, industry, and technical analysis. | | Free_Share_Market_Tips_and_Grey_Market_Premium Free Indian stock market tips and updates. Information about upcoming IPOs and recommendations. | | Free_Stock_Scanning_Tool Our goal is to help traders maximize their profit by providing free stock scanning tool using technical indicators such as moving average, exponential moving average, macd, stochastic, candlestick and | | Fund_My_Mutual_Fund Stock analysis & trading from aspiring mutual fund manager. | | Fundamental_insights_and_ideas Stock market and technology enthusiast. This technogeek quant analyzes the financial markets, economic trends, technology ideas, and tech companies. | | Gentle_Investors Free stocks research and analysis for Indian stock market. Intraday Daily Weekly and Multibagger stocks recommendation with Short term Long term Trading call. | | Hometown_Stocks A Web site for individual investors to share knowledge, experiences, tools and information. Top-down is our approach, knowing a company inside-out is our goal. Create your projects, start building you | | iBankCoin_com Free stock picks from professional traders. | | IndexIndicators_com Stock market charts and market commentary. | | Indian_Bulls_N_Bears Free stock picks for Indian stocks. | | Indian_IPO_Blog News, statistics, allotment links, and other information of the latest Initial Public Offers (IPOs) in Indian Stock Market. | | Initial_Public_Offer_(IPO)_Investor_Souk Weblog format about Indian IPO Investors. Provides latest information, market buzz and other details about Indian IPO/FPOs. | | Insider_Monitor Reports insider trading activities including stock purchases, sales, and option exercises to the public in daily, weekly, monthly, and real-time reports. | | Investing_Blog Information and independent opinion for those interested in investment in stocks, commodities, funds, forex, futures and options. | | Investing_in_Stock_Market Analysis of global trends in equity, commodity and bond markets. Global economic factors such as government policies, inflation, recession etc. affecting such trends. | | Investment_Talk_With_SPBrunner Blog with research and commentary on stock picks. | | IPO_Scoop_com IPO market news and calendar with ratings. | | iStockAnalyst Research articles for investing in today's market. The research articles are complemented with research data and custom equity rankings and market scans. | | Just_Stock_Picks Stock picks researched from top rated investment newsletters and analyst ratings. | | Kung_Fu_Trader Variety of futures and stock trading strategies as well as daily market commentary. | | LanczGlobal_com Offers proprietary research services of Alan B. Lancz & Associates, Inc. which includes independent research, written publications, financial analysis, real portfolios, investment strategy, trans | | Leeb_IPO_Insight Published under the direction of Stephen Leeb, Ph.D and Sr. Editor. Subscription service with focus is on IPOs. | | The_M&A_Researcher Daily subscripiton based information service dedicated to providing in-depth research, data compilation, news coverage, and fact-based analysis of corporate merger and acquisition transactions for the | | Mad_Mergers To help you succeed, on this website you will find tips on trading stocks that are in mergers, facts and education on merger arbitrage, and essential stock merger data. | | Market_Fry Stock picks and commentary for NSE and BSE. |
|
home
arbitrage
email
books
links
 ArbitrageView.com v:shapes="_x0000_s1028">
ArbitrageView.com intends to identify and track the
profit opportunities
on pending merger and acquisition deals in the U.S. markets.
Merger Arbitrage
Merger arbitrage,
also called Risk Arbitrage is one of the most popular hedge fund
strategies. It involves buying the stock of the company being acquired
(“the target”) while selling short the stock of the acquiring company
(“acquirer”). Normally the acquirer will offer a premium in order to
purchase the target company. After a merger deal is announced, the price
of the target company usually moves substantially higher to reflect the
premium in value being paid by the acquiring company. Despite this
increase, the target’s stock may still trade at a relative discount to the
final merger value. The discount spread is the profit opportunity which
the risk arbitrageurs attempt to capture.
Risks
It is important to
note that merger arbitrage is not a complete risk free strategy. Profiting
on the discount spread may look like the closest thing to a free lunch on
Wall Street, however there are number of risks such as the probability of
a deal failing, shareholders voting down a deal, revising the terms of the
merger, potential lawsuits etc. In addition the trading discount captures
the time value of money for the period between the announcement and the
closing of the deal. Again the arbitrageurs face the risk of a deal being
prolonged and achieving smaller rate of return on an annualized basis.
The size of the
arbitrage spread is usually a good indicator of the probability of success
assigned by the market participants for each deal. A deal that is
perceived as riskier will trade at a bigger discount compared to other
deals, therefore offers better returns for the traders willing to take the
risk. The arbitrage spreads will change with time and as new information
become available. As the closing date of the merger approaches, the spread
should eventually converge to zero.
Diversification
One
of the best ways to reduce the risk in merger arbitrage is to participate
in multiple deals simultaneously. Diversifying across several deals
without being overweight in any particular one will ensure that if one of
the deals fails it will have only limited impact on the portfolio as a
whole.
Cash Merger
There are three main
types of mergers - cash merger, stock merger and combination of both cash
and stock merger.
Perhaps the easiest
merger type to understand and calculate is the cash merger. Here is one
example: Company A is buying Company T for $20 a share. After the
announcement, the stock of company T trades at $18 per share, therefore
the arbitrage spread is $2 or 11.1%. Let’s assume this deal is scheduled
to close in 6 months. This trade will yield 23% on annualized basis. In
this scenario the arbitrageur will simply borrow at a rate lower than 23%
and purchase the stock of company T.
Stock Merger
Stock mergers are
usually more complex. In general the Acquirer will offer some of their
shares in exchange for the shares of the Target Company. For example the
acquirer will offers 0.5 shares of A for each share of the target T. If A
is trading at $40, the merger value they are offering is 0.5*40= $20 per
share. The main catch here is that the implied value of the merger becomes
a function of the stock price of the acquirer. If the Acquirer trades at
$30 by the closing date of the deal, the value of the deal is only $15.
The trading strategy
in stock merger scenario will be to purchase the Target and sell short the
Acquirer using the merger ratio. In this example it would a long position
of 100 shares in stock T and a short position of 50 shares in stock A. By
doing this the trader will be locking in the arbitrage spread. Regardless
of which direction the price of the Acquirer goes one side of this trade
will loose and the other side will profit. The ultimate profit will be at
the time the spread converges to zero.
Stock and Cash
Merger
In this type of
merger the Acquirer offers a combination of the 2 scenarios already
mentioned. To continue the example from above the Acquirer may want to pay
$10 per share in cash and .25 share of A for each share of T. Again the
merger value will be $20 = $10 + 0.25*$40.
A hedge trader will
have to consider that the ratio here is 0.25 and assume the appropriate
short position
Research and
Analysis
It is essential for
any hedge trader to perform thorough research before entering into a risk
arbitrage position. Every deal is unique. In addition to the 3 types of
mergers listed here, there may be additional conditions and rules which
may alter the calculations. The best source of information for each deal
is the press release issued by the companies.
This
material is for informational purposes only and should not be construed as
an offer or solicitation of an offer to buy or sell securities. At anytime
AV's affiliates may maintain long or short positions in the securities
listed in this report. The information contained in the report is not
guaranteed by ArbitrageView.com to be accurate and should not considered
to be all-inclusive.
Keywords:
arbitrage, arbitrage inside
secret skewness volatility, arbitrage convertible hedging insight
successful technique, sports arbitrage, risk arbitrage, arbitrage sports
betting, arbitrage continuous in theory time, convertible arbitrage,
arbitrage trading, arbitrage sports betting services, complete arbitrage
deskbook , arbitrage pricing theory , arbitrage finance mathematics
springer , inside volatility arbitrage , statistical arbitrage , arbitrage
guide investor risk , arbitrage forex, triangular arbitrage, arbitrage
trading tracker software, adsense arbitrage, fixed income arbitrage,
arbitrage continuous theory time, arbitrage finance financial guide market
series wiley, currency arbitrage, an arbitrage guide to financial market,
arbitrage capturing cd hedging pair profits risk statistical strategy
trading, arbitrage continuous finance in oxford s theory time, arbitrage
theory, tax arbitrage, arbitrage software trading, arbitrage betting ,
arbitrage international, analytical arbitragedeal, finance, financial,
mergers and acquisitions, MAs, MA, mergers, acquisitions, private equity,
venture capital, bankruptcy, IPOs, laws, regulations, deal makers,
corporate restructuring, private equity, funds, Wall Street, bankruptcies,
legal, tax, corporate, news, technology, arbitrage, tech, metrics,
business, executive, Wall Street, MA, MAs, equity, deal, deals, policy,
|
|
