GREY:WFEMF - Post by User
Post by
74volframon Aug 01, 2015 12:55pm
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Post# 23982742
trade logic (thank you flow)
trade logic (thank you flow)Buy and Sell:
- On the sell side these are people that believe the SP of AII after the merger will go down: some just do not like the deal on fundamentals, others maybe want to play the merger volatility. From the lot sizes and the brokerages used the sellers are mostly retail
- On the buy side there are two institutional brokers: Instinet with a bid at 6c and yesterday also ITG Canada with a bid at 6.5c. These brokers trade on behalf of hedge funds, pension funds and other institutions. sometimes called "smart money". Smart money is not always right, but it is patient and knows how to take advantage of situations such as mergers to obtain the best deals.
All they have to do in this case is absorb the selling that comes down from retail.
What can happen?
Assuming the merger goes through and AII is still at 80c. Now the WOF shares that were bought at 6c are worth 8c when converted to AII shares. that is a 37% gain overnight for the Instinet buyer. Since these guys are usually in for the long term, it is possible that little of that 3M shares that was bought last week will be flipped after the merger, and that will provide some stability to the AII SP after the merger. So the AII SP may not come down much, which will probably upset the volatility play. but who knows at this point ...
Why not buy AII instead?
There are no sellers of AII right now. Buying the equivalent 300,000 shares of AII in one week will probably push the AII SP to 2.00. Assuming the merger goes through, the smart trade right now is buy Woulfe.