Bayer trying to BTFO Monsanto

Monsanto has rejected bayers first offer for a buyout
Thinking about buying monsanto and bayer call options in case they reach a deal within the next month.
what do you think fellow bizraelis?

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bump
this is literally a "to the moon" opportunity if they reach a deal how have none of you seen this?

its all priced in you idiot, do you really think you can beat all the risk arbitrage guys with a much better read on the situation and who are paying a fraction of the commission you pay?

bayer has dropped recently in light of the deal. if monsanto accepts a deal theyre going to jump

monsanto rejected at 122 which was already mad expensive for bayer (offering all cash), which is why bayer dropped

if monsanto accepts it'd have to be much higehr than 122, in which case bayer would drop even more

yes but if they accept a deal monsanto is going to jump "to the moon" so to speak as these mergers can be quite unpredictable but a 40 point jump isnt unheard of with a pharma merger

monsanto is gonna jump to the accepted offer minus a discount for risk that it gets regulated by antitrust authorities

and in either case there's no point uying bayer like you originally suggested

so ???

What do you mean, "beat them?" All you have to do is the same thing they do. How do you know a bunch of prop trade guys arent already doing this?

its about EV and hedging when it comes to arbing this kinda shit

you cannot do the same thing they do because they're executing a shitton of trades at different price points with more sophisticated options strategies at lower commissions that makes wha they do plus EV by their models.

very few arb trades today are pure convergence/divergence trades.

Still not seeing how it's you vs the big money

do you know what a risk arb does?

ok here's a super simplified example:

A wants to buy B. B shares are trading at $50, A offers $100.
Arb trader thinks there's a 50% chance the deal will go through. He will long B shares if the market prices it at below $75, and short B shares if the market prices it at above $75. He pays, hypothetically, $.05 per trade.

You want to follow his strategy. B is trading at $74.50 - great, time to long. but wait, because you're a retail fuckboi, it costs you $1 per trade. Suddenly, the plus EV trade for the risk arb becomes minus EV for you.

And this is just a highly simplified example of how this works. you have to remmeber that for the arb trader to get at the 50% estimate, there is considerable research and due diligence to be done, much of it while technically public info is in practice "insider" trading on information that's extremely difficult to obtain. Ex. conversations with former lawyers, antitrust regulators, corporate M&A analysts, etc., that come at a price. There's no guarantee you can come up with a good estimate.

Such a mega merger/takeover will probably take 1 year to finish the work. Also just a hint, during an M&A the targets stock goes up due to the premium being paid while the acquirers stock declines due to investors not beliebing in the benefits of such a high cost takeover and also due to probably equity dilution.

So I really wouldn't buy Bayers stock. Also plenty of studies show that this kind of mega mergers or takeovers don't really create value in the long term

Do you actually really know what Arbitrage means? What you are trying to explain is Merger Arbitrage, but you did it completelly wrong. You are confusing a normal speculative investing with Risk Arbitrage. Get your facts right boy.

Here's how it really works: let's say Company A is currently trading at $10/share. Company B, which wants to acquire Company A, decides to place a takeover bid on Company A for $15/share. This means that all of Company A's shares are now worth $15/share, but are trading at only $10/share. Let's say the early trades (typically not retail trades) bid it up to $14/share. Now, there is still a $1/share difference--an opportunity for risk arbitrage. So, where's the risk? Well, the acquisition could fall through, in which case the shares would be worth only the original $10/share.

So basically Risk arbitrage would make only the $1/share difference profit, while normal speculative investing would make the $4/share profit.

>Not knowing that risk arbitrage and merger arbitrage are the same fucking thing
Stop acting like you know shit

So please. Where did I say it wasn't you idiot? I just used both terms as they mean the same.

And I probably know more shit than you. I work in the finance industry.

i dont even know what you're trying to say senpai i was just breaking down arbitrage and why trading on arbitrage to "go to the moon" is a stupid idea.

and we agree that buying bayer to benefit from this is dumb anyway

saying
>I work in the finance industry
sounds pretty stupid desu. a bazillion people work in finance zz

>What you are trying to explain is merger arbitrage
No shit, thats what he said he was talking about. Either you can't type coherently or you didn't know it's the same thing.

>Mergers don't create long-term value
Good job, except that OP wants to buy options anyways so why the fuck would that even matter?

>I work in finance
So do I, now get off your high horse. OP was clearly trying to play some kind of merger arbitrage game, which is retarded on its own but there is no need for you to get all huffed up about that other user.

Are you an idiot? I literally wrote:
>What you are TRYING to explain is Merger Arbitrage, BUT you did it completelly wrong

Can you even read english?


This is why I really hate Veeky Forums and don't come so often. You are all a bunch of wannabe traders and when somebody who works in the industry corrects you, you all go full ape shit crazy. Fucking retards.


>I work in finance
>So do I, now get off your high horse.

Well, I work as an Analyst at a Trading Desk at UBS. Not everybody works at the biggest and most important swiss bank and one of the world's largest and most profitable investment banks ;)

The fact that you think being junior analyst bitch at ubs is
A. Worth bragging about
B. Worth bragging about on Veeky Forums

Means you're probably a huge loser.

Hey fuckhead, that still doesnt make it "me vs. the big money arbitrage trader."

Do your calculations and if you see an opportunity to make money, than do so. Why do you artists worry so much about whether or not someone is gonna make more money than you?

>protip: someone will always be making more money than you doing what you do on a larger scale

We both know that you arent a trader. Stuff like
>the acquirers stock goes down in a merger
screams stupidity. Good luck with you UBS operations job though :^)

I don't even know why I am still replying to you. But here you go

investopedia.com/ask/answers/203.asp

Also, why don't you check what happened to Bayers stock price?

It happens more often than not but its not a general rule at all. There are a gazillion examples of markets liking a certain acquisition. I feel like as a trader you should know that...

Analyst...the stupid of Wall Street