Disclaimer: not investment advice but could be hell of a trading idea.
The most exciting stock this morning in our arena got to be WLS. The General once again is proposing to take the company private, as he did last year. Back then, the offer price was around 82. While it did not happen, the stock went up to almost mid 100s.
Today, biz.yahoo.com
Now this is a real tender with a real date and a real price, not just talk, so we have to take that as real.
Needless to say, with less than one month to tender, the stock should go to around 93.
But there are 2 major "problems"
Huge insider and institution ownership.
finance.yahoo.com
Huge short position compounded by a thinly traded stock.
shortsqueeze.com
So there are around 670k shares shorted that are going to have to cover at 93. If they all wait for April 13, that is their limit assuming all long holders tender their shares. Of course there is the risk that longs will not tender but hold out for a higher price, then it would be logical for the shorts to cover now. So the shorts that are covering now either decided to just throw in the towel or are concerned that the stock will run up like last year.
On the long side, those who plan on tendering April 13 will receive 93. Logically, they would gladly take the 100 right now and receive a $7 bonus. On the other hand, the longs who are not selling obviously believe the company is undervalued at 93 and expects more.
The stage is set. 937k traded as I type. $7 above tender price.
Here are the options.
If you think most long shareholders believe the company is not even worth 93, then it is a great short here because they will all tender at 93 in one month and you can pocket $7.
If you think the company is worth more. Then it is hard to play.
One factor being this is a major shareholder taking the company private, not a takeover or merger. The likelihood of a "competing" bid is almost nil.
Further more, there is only one no-name analyst covering this stock and his estimates had been pretty far off. WLS themselves just guided down from 20ish to 15ish in earnings this year.
Now the game is defined - place your bets. |
