We’ve seen a few of these in the last few years. Odd lot priority of 99 shares. Currently it’s worth about $700, but we’ve often seen the profit expand to maybe $1,500 or sometimes even $2,000 during the course of the offer.
I’ll have this on my radar and looking to capture a good spread.
Jim
Typically on these you can wait until the last few days to buy the stock, after you know what the exchange ratio will be. Then you can also lock in the profit by shorting the deliverable, though you’ll pay the cost of borrow. It typically is settled about a week after the closing date.
Jim
This is what prospectus says..
for $100 of Medtronic Ordinary Shares accepted in the Exchange Offer, you will receive approximately $107.53 of MiniMed Common Stock, subject to an upper limit of 4.5939 shares of MiniMed Common Stock per Medtronic Ordinary Share
At current exchange rate of $100 MDT is worth of $MMED is $101.11 (assuming 4.5939 upper limit). Am I reading this correct?
Right now the indicative exchange ratio is 4.5306, according to the site. So you’ll get 4.5306 shares of MMED for every share of MDT.
At current pricing, you pay 99 sh * $92.6 = $9167.40
You’d receive $22.4 * 99 * 4.5306 = $10,187.43
Profit = $1,020.
Jim
Thanks. The usual caveat of one transaction per SSN still applies?
Yes, that’s correct.
Jim
Jim,
Hope all is well with you. Thanks for posting this one!
Is this similar to the Bagger Dave’s deal of yesteryear - where you could purchase 99 shares each in several different accounts? (I believe I managed to buy that one in 4 different accounts.)
No. See immediately above. One per SSN.
Jim
A Deal that will live in infamy!!!
Friendly reminder, the offer expiration date is Oct-9th. I am planning to buy and submit on Oct 6th and probably will consider buying puts or shorting by Oct8th/ 9th.
A couple notes. The spread is really quote narrow on this one, around $370 right now.
That may impact the viability of shorting as a hedge, given the potential cost of borrow. On the one we did last year, the cost of borrow even just for a week on IB was several hundred dollars, IIRC, given that many people were shorting.
Second, it looks like they will announce the final exchange ratio on Oct 8, lessening the time that you may need to hold the short, and therefore the costs of it. This still gives you enough time to notify your broker and to have them submit the shares.
Good luck,
Jim
Some further details here as we move close to the end
Jim