Jim,
GM announded the terms of their stock swap today. Between April 24 and May 19, GM stockholders may request their GM shares be swapped for GMH shares, at a ratio of 1.065 shares of GMH for each share of GM. That is a 17 % premium based on yesterday's closing prices.
Right now, with GM at 90, that means that GMH would have to decline to about 84 to be equal in value. Arbitrageurs are buying GM, and selling GMH short. The reason the gap does not close completely is that there is some risk to the arbs, as the swap may be on a pro rata basis if too many shares are tendered.
Anyway, GMH stock will be under pressure at least until late May.If you have taken a beating on GMH, like I have, I would definitely hold on at this point. There is not a lot of downside risk from here, and it should do very well after May, assuming that the bear market doesn't get much worse.
Russ |
