I have bought CHC on the hopes of earning a return on the spread between the buyout price and the market price at the time, for more details see here. So far the probability of the buyout occurring is increasing for several reasons:
1. shareholders approval of 99%, my votes are included in the 99% somewhere,
2. granting of court and regulatory approvals,
3. credit issues are easing a bit to allow the already small financing portion from Morgan Stanly to fund the buyout.
Given these developments, I can put the buyout probability of occurring close to 99%, 1% for idiot factor.
However, opportunity cost for these type of strategies are key. These strategies are not worth pursuing in an up market and the market in April has recovered in a major way. So far the position is o
utperforming the market since I initiate it. But if the market continues to perform in May as it did in April, I will under perform. The good news is the buyout is scheduled to close in June at that time I will be able to allocate capital quickly before missing any other opportunities.Performance of CHC vs major indexes:
CHC 5.12%
TSX 3.52%
S&P500 4.04%
2 comments:
Sami, congratulations on CHC; it does indeed look like it will go private. I wish that I pulled the trigger on that arbitrage position. To quote Warren Buffett, “Most of my mistakes have come from omission or not investing in companies that I should have in industries that I know”.
thanks Ryan.
I think the state of the market allowed me to take advantage of the spread, otherwise it should have been much tighter.
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