I'm not sure you need to allocate the cost basis according to some pre-determined formula. I'll investigate with my broker Monday.
I know if you sell covered calls, and they expire in the money, so your shares get sold, you can instruct your broker which shares to sell, so you can instruct them which cost basis to use if you have different lots with different basis. Maybe it's the same with weird stock plus cash acquisitions? I don't know, gotta check it out.
Hmmm, I suppose we could sell SIMO the day before deal closes, it would probably cost a very small amount, maybe a dime, maybe 20 cents? Not a bad idea. Then you've got a bunch of cash to do with as you will. But....I think the MXL portion is tax free (stock for stock), so it's sort of appealing to have that portion to realize the gains on in later years. I also wonder if MXL - after a few years of integrating with SIMO - will lose the "Taiwanese stock valuation discount" that afflicts SIMO? Seems like it should, XML being a US company. If SIMO's revenues and EPS can get a normal US semi multiple rather than the Taiwanese discount, then the forward PE should move from ~8x to 14x, and that's a lot of share price increase. And MXl equity will be VERY levered due to the large debt position. And MXL management seems to think they can increase the gross margin of SIMO's sales from ~50% up toward 60%, which makes sense as competition in SIMO's space (flash controllers) is quite low. So......MXL may be a super investment as long as the revenue streams don't totally blow up for some reason.
I've been saying SIMO should sell for those reasons for a while, I just didn't expect the sale/deal to be mostly cash (so SIMO shareholders don't get the acquisition benefits) rather than stock.
Here's another question. If the deal is expect to close in Q1 2023, and in Dec 2022 we sell an out of the money SIMO June call....what happens to the SIMO June call option when the deal closes in March? Any idea? |
