Merger Arbitrage: Large Spread In The Acquisition Of American Creek Resources | Seeking Alpha
Conclusion;
Based on the current market price being roughly halfway between the pre-deal price and the acquisition price, the market is giving this deal a probability of closing of just 50%. My conclusion is the probability should be closer to 85% or 90%.
In summary, we have a deal with an air-tight merger agreement, including no financing condition and a specific performance clause; where most required approvals were already obtained; a motivated acquirer and target that so far have together been diligently working to get the deal to closing; and lastly, the support of the very influential investor Eric Sprott who is a controlling shareholder of the target.
My initial misgivings due to the digital token financing appear to be misplaced upon further research. While I still cannot claim to have the details or to fully understand it, it gives me comfort that Eric Sprott’s team appears to trust it.
I would label the chances of this deal closing as “highly likely”. With the current market price being 38% below the acquisition price this merger arbitrage situation appears to be a great opportunity.
As always, arbs should not invest more than a couple of percent of their portfolio in any one situation as the unlikely scenario (deal termination) will happen on occasion.
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