| | | There is another possibility that might explain China's not yet approving the deal. The longer Chinese regulators say nothing about the proposed merger, the greater the uncertainty concerning the ultimate outcome. This uncertainty weighs on the price of both SNDK and WDC, contributing to lower prices for both stocks.
Now it is also a fact that Chinese interests wanted a share of the combined WDC and SNDK but withdrew their $4 billion proposal on the notion that U.S. regulators might not approve of Chinese investors getting a major foothold in a fast growing technology, namely flash memory for use in enterprise/cloud servers and also for use in smartphones. At this point, Chinese investors could do the next best thing, buying both SNDK and WDC before the proposed merger gets regulatory approval in China, allowing Chinese investors to establish a position in the combined companies at a lower price than would have been paid if the original $4 billion had been paid to WDC.
If this strategy is actually being pursued, it means that both WDC and SNDK shares will rise, at least slightly in the coming month or so. Chinese interests acting on this strategy could probably obtain enough shares in the combined firm to gain a seat on the Board of Directors, leading possibly to plans to establish facilities in China for manufacturing flash memory modules.
If this strategy is NOT being pursued, I think the merger still takes place in the next few months, and the price of both SNDK and WDC should increase enough to make holding the shares of either or both firms worthwhile. I still have some doubts about the viability of a firm that has taken on as much debt (and high interest debt to boot) as WDC. However, that would not discourage me from continuing to hold my existing SNDK shares, at least until the proposed merger is approved by Chinese regulators.
Art |
|
