Odds Update for EMAG Arbitrage


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There has been a real good discussion over at the original EMAG post and with just 1 week remaining until Feb 11, there has been no news (good or bad) from any party. The spread when I wrote the first post was at 47% with a price of $1.94.

After the initial post, I couldn’t find additional information on SIBL, HSSO and EMAG to counter my reasonings so I bought at $1.94 on Jan 27. On Feb 3, I liquidated by PSD position in order to take another bite at $2.40.

As you can see below, I’ve upped the probability of success to 80%. Why? If you look at slide 10 in the presentation (image below), HSSO’s future depends on acquiring EMAG.

hssemag

EMAG will become the “platform” for further growth and strategic acquisitions. With SIBL holding a majority stake, my assumption is they are also backing HSSO. An event like last December shouldn’t occur again.

Odds of the Merger

Current Price: $2.47

Upside Potential: 15% / $2.85

Downside Potential: 50% / $1.23

Probability of Success: conservative: >60% | realistic: > 80%

Probability of Failure: conservative: < 40% | realistic: < 20%

Time Frame: min: 3 weeks | max: 11 weeks (3 months) until March 31,2009. min: 7 days | max: until March 31, 2009 (highly unlikely at this point)

Disclosure

I hold EMAG at the time of writing.

[tags]special situation,EMAG,HSS,SIBL,merger,arbitrage[/tags]

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4 responses to “Odds Update for EMAG Arbitrage”

  1. CarlD says:

    It was clear that HSS was anxioux to complete the buyout of EMAG. HSS ihas negative value and is not traded publicly.

    The question was SIBL, the banker. Stanford did not come forth with the money as promised when promised.

    Then SIBL posted additional “good faith” funds, set a new date, and waived ALL POSSIBLE OBJECTIONS to the deal.

    Although this is a small cap company with a smaller cap buyer, you can count the days until it will close.

  2. Jae Jun says:

    I agree. I did know that HSS were determined to finalize the merger but the presentation sealed it with their own words. I’m confident that SIBL will definately be able to providing the funding. Waiting for the good news on closing day of Feb 10. Remaining 10% spread is still tempting with a few business days left.

  3. SIB did not provide ELAN with financing and lost control of company:

    http://www.rttnews.com/ArticleView.aspx?Id=847645&SMap=1

    bernardo madoff’s last blog post..El paraíso (bancario) de Antigua & Barbuda

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