RE:RE:Who Would Have Thunkmesa1, there are 9,200,000 shares short on DML in Canada with a new number out shortly. Where does the 12,000,000 number come from, the US side short position? If so do you have alink for that? Thanks,
mesa1 wrote: Obviously with 12 million shares short on DML the arbs were betting big that the merger would go through. Nobody in their right mind would be shorting DML at the recent prices in the middle of a merger proposal with offsetting that short position with a corresponding long position in FCU.
This is now unwinding at a material loss to those players.
Those are the same players who were voting YES for the merger, and thinking it was a done deal (assuming they took their positions ahead of the record date).
I suspect that as the record date was passed and some results leaked out that the NO vote was gathering steam, some of the arbs backed out of their positions. This would have caused some price strength in DML and weakness for FCU ahead of the meeting and results being official. We saw the short position decline for DML as September progressed.
What looked like an easy 5-cent lock in for the short-DML Long-FCU arbs ended up a 14.5-cent loss position at today's trading price (assuming they established their positions at an average spread premium of 1.21 versus the 1.26 exchange ratio.
Yoda1955 wrote: The winning ARB would have been long DML and short FCU. Just goes to show conventional wisdom does not always come into play.