TUDO=Free money?

Discussion in 'Stocks' started by DegenFarang, Mar 12, 2012.

  1. Two largest Chinese video sites announced a merger this morning. Each American share of TUDO will be given 1.595 shares of YOKU upon completion of the merger giving TUDO 28.5% of the combined company and YOKU 71.5%. The companies will keep trading as YOKU.

    YOKU currently trading at 32.13 (up over 25%)
    TUDO currently trading at 39.10 (up over 150%)

    At 32.13 each TUDO share would be worth $52.25.

    Whats the deal? Shouldn't TUDO be in the mid to high 40's? Shouldn't they at the very least be rising and falling in tandem? YOKU has been going up since the initial pre-market spike while TUDO has been falling (it got as high as 48).

    Full disclosure: I'm long TUDO at 38.75
  2. lwlee


    When TUDO consolidated at 38, I was assuming that the stock acquisition terms would work at to around that number. I didn't do the numbers.

    Perhaps there is more to the acquisition terms.

    Edit: The other thing is that since it's such a rich valuation. There's plenty of skepticism as to whether the deal will go off or not. If I was a shareholder of YOKU, I would question why the deal didn't go off cheaper. (Well maybe not since, even YOKU is up so much :p )
  3. Think the market is finally starting to figure this out.

    Today they are moving in opposite directions.

    TUDO 40.56 +2.75%
    YOKU 29.79 -6.47%

    Still some money to be made. Each TUDO share is worth $47.52 of YOKU if/when the transfer goes through.
  4. eddielee


    I was also wondering about it !!! is not this sure money to make ? target price should be YOKU price * 1.595.....

    can anyone offer some explanation ?
  5. Up over 10% today, currently at 43.63.

    Still plenty of fat left to trim. 1.595 of YOKU = $50.70
  6. eddielee


    momentum seems gone?
    38.81 Down 1.09(2.73%) 11:05AM

    38.81/1.595=24.33,market believes YOKU is overpriced ?
    24.33 means people think acquisition has no forseeable impact on the future of the merged company ?what do you say,DegenFarang 。。。。
  7. I think if the market thought YOKU was overpriced they would sell YOKU and the price would go down. These two are rising and falling in tandem after a correction a couple days ago.

    The market is concerned the deal isn't going to go through is the only reasonable explanation. These being Chinese companies is surely part of the reason, the government can do some weird things over there. And they exert particularly strong control over media companies.

    However I think it is naive to assume these two companies have not already been paying bribes for years and didn't pay the correct bribes already to ensure this deal was going to be approved before it was ever announced.

    Then the only roadblock remains TUDO and YOKU shareholder approval of the deal. Again, it's hard to imagine a scenario in which the main shareholders were not already informed about this and gave their approval. So it's just another formality.

    I don't see any level of risk here that justifies the huge discount currently on TUDO shares. That said, I did liquidate half my position above 43 and I'm not adding to it.
  8. metameta


    you got out right?
  9. Not completely. I sold 50% at 43.85 and still have the rest. Going to continue to hold it until the gap closes.