Post by
letsgetready on Sep 13, 2013 2:20pm
REPOST: FORMULA BETWEEN FCU AND AMW SHARE PRICES
I found this formula works pretty good. There are 2 estimates in it: the values of the 2 spincos.
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The following formula should apply otherwise an arbitrage opportunity will exist.
AMW = 5.725 (FCU - FS) + AS
where:
AMW= current AMW share price
FCU = current pre-merger FCU share price
FS= estimate of Fission spinco share price
AS= estimate of Alpha spinco share price
FS and AS are unknown, but built into the prices of FCU and AMW currently.
Value of FS= $3MM cash+$7.5MM PLN (priced off AAZ mkt price) + $2.0MM clearwater + $3.0MM Northshore+$1.5MM other assets = total $17MM / 169 million FD shares = 10 cents per share
Value of AS = $3MM cash + $5MM other assets (I'm not fully upto date on AMW's other assets) = total $8MM / 31.4 million FD shares = 25 cents per share.
Using the formula, current FCU bid-ask is 1.13-1.14. lets use 1.135 for FCU, FS = 0.10, AS = 0.25 so
AMW = 5.725 (1.135 - 0.10) + 0.25 = $6.17
we are at 6.15, with a bid of 6.12, ask 6.14, so there currently exist no mis-pricing or arbitrage opportunity in my opinion. i.e the formula is close.