Arbitrage....that is what you are talking about here. The reason they price it below 34 is twofold:
1. Possibiliity that deals fall thru....and they do..AHP's deal, SPLS & ODP, BT and MCI , etc.
2. That it is a stock and cash, deal if i remember the news from this morning....if the suitor's stock falls, the stock portionis worth less.
Arbs buy the target copmany and sell the suitor...they simply hope to realize those 2 1/2 bucks bewettn 31 3/4 and 34. Very often, if it is a cash deal from a big company, with little FTC concerns, the spread might only be 3/8 or 1/2....in a deal like this with stock and a volatilemarket, it is more......
Talk about being whipsawed....the money store was a stock we had been buying over the past year or saw with low interest rates and word that their loans were pretty secure. Anyway, I had one client who had a couple thousand from low twenties, ran to mid thirties, suggested he thin out, didnt, fell lower a few weeks ago, wondered to me why we didnt sell (had to remind him he had said no), then sold some at 24, disappointed it was lower than previously, then it started acting again, ram up high 20's..and tell him that it was looking great, that we were seeing lots of accumulation, suggested he stay in it, he decided he had to get out because LAST time it fell on him....anyway, sold last pieces on his request yesterday, today buyout 5 points later....who do you think called first thing this morning, upset that "we" had sold........its a good think i like people.
Regards,
Steve@yamner.com |
