PENN:What's it worth if the deal doesn't go through?

Discussion in 'Stocks' started by Mvic, Jun 22, 2008.

  1. Mvic

    Mvic

    $15-25?

    This was a growth story when the bid was made but it has lost that earnings growth since. PE is now much higher than its industry average and margins are falling.

    Options look like they are saying no deal in July and likely a much lower price in Oct.

    If FIG pulls the plug where does this trade?

    Looks like there is money to be made on a straddle here, any option gurus have any suggestions on how best to play this given the scenarios:
    1. Deal gets done at $68 by Oct exp (highly unlikely)
    2. Deal gets done between $40-68 by Oct Exp
    3. Deal gets done under $40 by Oct exp (highly unlikely)
    4. No deal
    5. Still in limbo by Oct exp

    Are banks hurting so badly that they would have to pull $ out of merger arbs like this perhaps accounting for some of the fall in price?

    Why extend the bond offer with 99%+ already tendered if not because they don't want to go through with it, or at least not at current price?