Categories
Investing

Pfizer Wyeth arbitrage game

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Pfizer (NYSE: PFE) agreed to buy Wyeth (NYSE: WYE) on Jan 26 2009 (forbes). Quote Forbes:

According to the terms of the deal, each outstanding share of Wyeth will be converted into $33.00 in cash and 0.985 of a share of Pfizer stock, valued at$15.57 per share, based on Pfizer’s current price.

Last I checked: $33.00 + $13.60 * 0.985 = $ 46.40 vs. Wyeth current price $42.53.

Hmm, 9% return in how long (one source says the deal could close in Q4 2009).

Potential risk:
0) Pfizer stock drops, because WYE stock is now tied to PFE stock (0.985 correlation);

1) The close could not close by Q4 due to financing or anti-trust issue;

2) Another bidder emerges (whch is a good thing);

Reference: arbitrage explained in Wiki.

Categories
IPO Stocks

I sold MXB six hours too early

Reading Time: 2 minutes

Stocks in review week of Dec 16 to Dec 22

1) I bought some MXB shares on Dec 19. After I read its prospectus more carefully, I found two things I don’t like: it will use the proceeds of the IPO ($225 m) and borrow some $425 m to pay the dividend to its parent, Morgan Stanley; Morgan Stanley still controls more than 90% of its share. So I put up a limited sell order at 29.30 for Dec 21.

On Dec 21 the stock opened at $29.50 and had a huge run from 3:00 PM EST till close. It closed at $33.72. This reminded me 3 years ago I sold my 51job (JOBS) two days too early.