Subscription Receipts Advantage
After thinking about it I've come to the conclusion that the subscription receipts have an advantage over the common in certain situations. In both situations the advantage is due to the downside protection if the deal does not close.
Situation 1 is where one's portfolio already has a large weighting of ALA common. High weightings aren't a problem if the stock does well but not so good if the stock goes down by a large amount. For individauals in this situation the receipts are a safer play to participate in the potential upside with little downside risk. The downside risk would only occur if the deal closes and the stock price is way down. The other risk is if the stock does not close and ALA gains a lot in price. But then the common that already constituted a hefty portion of your portfolio will have done well so smile.
Situation 2 is buying on margin. Always a nice way to juice up returns. In this case I get a 6.7% dividend and pay 3% margin for an instant 3.7% advantage plus the dividend tax credit on the full 6.7%. The downside of margin is if the stock price tanks. In this situation, the $31 floor price if the deal does not close offers some comfort. There is of course the least likely scenario of the deal closing and the ALA share price below $31.
It should be interesting to see how these two classes of securities trade over the next year.