It’s a method of arriving at post conversion valuation assuming that the deal is final and no friction on the components. I have no idea how many synthetics you can short at 3.67. APE was 2.27 marketable at the close. I am going to feel stupid if I missed something here, but if my understanding of the deal is accurate then you’ve netted 1.4 pre/14 post split (ignoring sweetener). No risk to (option) structure as you’re in a conversion.
The PNL figure is the cost basis on AMC (post share-conversion) of 2.27 less the (option conversion arb) proceeds for a gain of 1.4/share pre split. This does not include the sweetener nor any issues with completion. You cannot gain > 1.4 (excluding sweetener) due to the share-conversion and the conversion in vol, comms, etc*. There are two conversions; one is class arb and the other is option arb. Long APE and short the AMC synthetic results in zero position, post option expiration. There is no risk as structured. I am not underwriting this; I am operating on limited info here. Trade at your own risk.
“Another Meme bites the dust -- AMC Hope you followed my earlier tweet below from April Here’s the bigger point: easy money promotes SPACs and NFTs and Memes etc When money is no longer easy lots of fun ideas bite the dust Quote Bill Gross @real_bill_gross · Apr 5 Replying to @real_bill_gross There are ways around the 100% borrow cost via options . Both APE and AMC trade 70 million shares plus a day — so super liquid. Think this through- where will the combined shares trade? I suspect 2 or so because of the massive dilution of new AMC shares being issued. 3/4
I head meant to state that since you're in the arb for a 1.4 gain then the conversion results in a street estimate of 14 for the shares, not 8.7. The gain from the option conversion is the street estimate and it worked out to that figure. My mistake was forgetting it's a pure arb if completed. Long APE = AMC. Long AMC and short synthetic = no position. 1.4 gain on arb * 10 (reverse split) = 14.
The gigi was the vol-arb as predictor of the AMC post split landing (14). I am a huge proponent of strict arbs as predictors of forwards post structuring.
I tried helping a few apes escape the carnage after reading your thesis. How could I explain the Shorts were not f’ed like they thought. You deserve their cash!
Yeah, the arb netted $14/share post split. I don't have my conversion gains yet as the components are still trading, but I am not going to unwind it (would cost a dime, pre-split). IOW, if you (theoretically) could trade the entire float with no friction... you earned the current market cap of AMC.