Buyout question

Discussion in 'Trading' started by texas elite, Nov 16, 2006.

  1. I am a total rookie in this aspect and would like some insight into this...I know it's a very elementary question, but still.

    Today CCU is offered a 37.60/share to go private...there is even talk about being outbid and shareholders demanding more...WHY is the stock only trading at $35.50 right now?

    I understand that the buyout proposal has to pass through a bunch of stuff before its completed...but is this $2 difference the risk associated with the deal not following through?

    Any help is appreciated. Thanks
  2. It's a time premium. Besides the possiblity of it not going through, you also don't know WHEN it will go through. Even if it was approved and you knew when, the stock will still trade lower than the buy out because people will have their money tied up until it is over. They have to decide if they can do more with that money in the market as opposed to waiting for the deal to go through.
  3. Gotcha...thanks a lot.
  4. timmyz


    i only read 1 yahoo article about it so my analysis can be incorrect.

    a 5% spread on a deal that's expected to close is high. there will probably be a dividend payment in between. if there is, then the $37 price is probably pre-dividend.