Some interesting thoughts while the spread still remains at ~$11.
Jim
5 Likes
That was too good to resist - added to my synthetic long…
1 Like
I have a question I haven’t been able to fully reconcile with myself.
The takeout price is $68.7B which was reported as $95/share when the acquisition was announced in January 2022.
Yet…the current market cap is $64.9B - meaning there is only upside of ~5.9%. With ATVI currently trading at $82.57, 5.9% upside implies a takeout price is $87.44. This makes me think the spread isn’t actually ~$11.
What am I missing?
Thanks for your help,
Matt
Hey, Matt,
Use the per-share figure. The reported deal price factors in cash at ATVI, etc. It’s silly for MSFT and the media to use that figure, but it may be to make the deal look just a bit smaller, etc.
Jim
3 Likes
That makes perfect sense, Jim - thanks!
This went pretty well so far! $11 is now down to $4! Thanks again, Jim!
Vince
Yes, this fat spread was sitting out there to within days of when the transaction might close, despite the fact that there was good details on how the judge would rule. A great time to buy short-term options. Then the UK’s CMA just happens to announce within an hour of the judge’s ruling that it’s willing to settle. The spread still offers a pretty attractive IRR if you think it’s going to close. (I do.)
Jim
2 Likes
Even before I read the excellent writeup Jim brought to us, I got paid to go synthetic at $85 for August expiry; I did that June 30, soon after reading the judge’s “This is basically all about one FPS game” comment/question… it seemed obvious that she thought the idea that a single videogame franchise was so important to competitive markets in videogames that Activision could not be bought by a smaller player in videogames…
Nice score, Rob!
Jim
Get your chips on the table!
Jim
Yet you could have bought the December '24 90 call for 3.10 or a Dec '24 synthetic long at 90 for $1.80 at the close. IRRs are pretty strong there still.
Vince