Napadoc / Squeak 22, re: EZCH vote...........................
1 ) “ ...why should the focus be "after the vote"...”
Those that **are** EZCH shareholders after a **no** vote, will most likely be immediately impacted by the market reaction .... most likely a significant share price decline (as other have pointed out), “... it would be difficult for EZCH to go it alone because of the dynamics that have played out since the offer....”
I recently took a look at EZCH’s put option open interest (Yahoo) at strike prices from $20 to $25. They total about 16,000 contracts which represents about 1.6 million shares (@ 100 shares/contract).
I’m no options expert, but it appears that only 5% of EZCH’s shares outstanding (30.1 million) are “protected”.
If I’m looking at this correctly, it appears that many may be hurt if a **no** vote results in a significant price decline.
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1.6 million shares / 30.1million shares outstanding= 5%
~16,000 Jan 15, 2016 open interest put contracts @ 100 sh/ contract = 1.6 million shares.
2) “... If the No vote carries again in January, then earnings estimates for MNLX will drop because the EZCH acquisition is accretive to MLNX earnings....”
Best I can tell using Yahoo “EPS trends” data, the MLNX FY16 EPS has only increased by 20 cents in the past three months ( $3.00 from $2.80), and that could have been based on its positive preannouncement on Oct 1, 2015. Given the above, it does not appear to me that EZCH’s acquisition has been priced into analyst estimates.
Credit Suisse has maintained their July 23 $50 target ( July 15 price at $46.98) even after the EZCH acquisition announcement, despite stating that their “analysis suggests the deal could be 25- 30% accretive to CY16 EPS..”
Given that MLNX is currently trading (~$41) less that than it was last July (~$47), with a reasonable below market PE (~15) and a 0.46 PEG vs the S&P 500’s of 1.80, it does not appear to me that MLNX’s share price currently reflects any benefit from the potential EZCH acquisition. It may decline however with a no vote, but based on the above that may only be a temporary market reaction. |
