Mental Models discussed in this podcast:
- Arbitrage
- Efficient Market Hypothesis
- Brand Power
- Luxury Power
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Show Outline
Merger Arbitrage – Examples and Discussion
- What is Merger Arbitrage?
- On November 24th, 2019, Louis Vuitton announced the acquisition of Tiffany for $135 per share.
- As of today’s record, on April 18th, 2020, Tiffany was trading at $129.15. (4.5% gain to reach a takeover price of $135 per share)
- As of March 18th, 2020, Tiffany stock reached a low of below $112 per share. (represents a 20.5% gain to reach $135 takeover price)
- Very low-risk takeover. On the day of the announcement, shares rose to over $134 per share.
Summary:
Merger Arbitrage is an investing strategy designed to capture the value in price differences between a soon to be acquired company and the acquisition price. Investors can sometimes earn high returns at low risk using this strategy.
References
- SpecialSituationInvestments.com
- @InvestSpecial on Twitter
- https://www.foxbusiness.com/markets/tiffany-stockholders-approve-merger-with-lvmh
