Well this arbitrage looks really interesting now.
Assuming PN is a bone fide company with strong independent growth prospects and assuming EBIX continues with its bid as is then…
On the one hand we can enter PN at 7.69 as it stands which is a decent entry price for PN on its own merit.
We can look at the arbitrage between the 9.50 and the 7.69 as a potential arbitrage of 23% which builds in some significant upside with a risk factor
Another way to look at it is that it gives significant protection to an arbitrage opportunity. Let’s assume the offer was a 55/45 mix of that means then there was 5.225 in cash on the table and 4.275 of EBIX stock (which is still at the same level as the time of the bid). If we call 5.225 of the 7.69 cash backed then for the remaining 2.465 you are buying 4.275 worth of EBIX stock - essentially a 73% upside. EBIX would have to fall 42% for you to be in the negative (which if that happened I would be buying EBIX like crazy anyhow).
I think the current price offers enough upside potential vs the risk factor of either failure to go through or failure to find a competing bid or decline in EBIX stock price which has stayed rock steady.
Saul (and others), Does PN interest you again, with the 9.50 offer on the table? Why or why not?
Hi Paul, No, I quit following PN when I said I was getting out. The reason was that I didn’t understand what was going on, with the law suits, the CEO owning the biggest customer, and all the rest. When I don’t understand what is going on I try to avoid the situation, except when a lot of people I have confidence in understand it and say that it’s okay. Now, with an offer on the table at $9.50, and PN selling at $7.69, that’s ridiculous and I don’t understand that either. Someone clearly thinks due diligence will derail the offer. There just seems to be something that’s not right. May I say, something fishy, about the whole thing. A very low PE, an offer of $9.50, and a price of $7.69…No way! Something is wrong about this picture.
Now I may be wrong and missing a great bargain, but I’ll just miss it.
Saul - I think what you are pointing out is THE risk here not EBIX and not the bid it is the confidence in the internal situation at PN as you illustrated.
A
I still think this will be sold by year’s end. The good thing about a CEO who is a very large majority shareholder is his goals are aligned with the common shareholder’s goals. The bad thing about it is he doesn’t feel the need to send any communications out to the rest of us on what is going on. I think it is the lack of news that is dragging it down - the market hates uncertainty.