Make 6c a share almost risk free profit?

[bvbfan]

WARNING their is some risk but the likelyhood of this happening are slim.

THIS IS NOT A RECOMMENDATION to make the trade, but pointing it out as a possible strategy/trade in this volatile market.

Strategy:
For every 1000 OXR short sold you buy 1539 AGC shares.
1 OXR short sold is current 2.76, 1 AGC bought is 1.755. At 0.65 OXR shares for each AGC, you are in effect paying 2.70 to get the OXR share.

The can be done either in the physical market or via CFD's


RISKS
-OXR fails to get 90% control of AGC and are unable to forcibly acquire AGC

-A counter bid for AGC (which would be good for AGC stock but possibly even better for OXR to not get control)


What it really comes down to is will OXR successfully get control of AGC, without having to increase bid.


Normallly hedge funds, abritrage players would be all over this type of trade and the spread would narrow but seems they are all in hiding.

Maybe someone can point out another risks that I may be missing here?

DISCLOSURE:
I am long OXR

 

[money tree]

thats some nifty thinkin outside the square bvb, wonder where you learnt that kind of thinking

 

[ducati916]

Standard Risk Arbitrage

You are correct, it tends to be a Hedge Fund tactic.
Some of the risks involved;

*Regulatory problems
*Financing problems
*Extra-ordinary changes in the business
*Due-diligence discovery
*Time risk
*Calculation of risk adjusted profit
*Short hedge being called
*No further stock borrow available
*Non-consumation charges
*Shareholders reject deal


These are the main ones, but there are always the unique and individual problems that are always popping up.

jog on
d998

 

[spitrader1]

Standard Risk Arbitrage

You are correct, it tends to be a Hedge Fund tactic.
Some of the risks involved;

*Regulatory problems
*Financing problems
*Extra-ordinary changes in the business
*Due-diligence discovery
*Time risk
*Calculation of risk adjusted profit
*Short hedge being called
*No further stock borrow available
*Non-consumation charges
*Shareholders reject deal


These are the main ones, but there are always the unique and individual problems that are always popping up.

jog on
d998

on a back of the envelope job there is about 0.03 cents borrow costs and 0.03 cents carry, so its trading roughly in line.

 

[stoxclimber]

As others have said, its a basic risk arbitrage. Not too much value in these scenarios imo unless you fancy your analysis as better than the hedge funds doing M&A arb.