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Stock price going down after acquisition
Posted on 12/14/15 at 11:16 am
Posted on 12/14/15 at 11:16 am
In today's news, Newell Rubbermaid agreed to buy Jarden Inc for $13.2b. NWL has dropped 10% today on the news. On the surface it seems like a good acquisition for them, add's to their shelf space at large retailers.
Why would a stock drop on news that it's buying another company? Does that mean Wall Street doesn't like the acquisition or is this normal activity?
Why would a stock drop on news that it's buying another company? Does that mean Wall Street doesn't like the acquisition or is this normal activity?
4
Posted on 12/14/15 at 11:22 am to CHiPs25
Seems like it's not that uncommon. Maybe more risk? Maybe overpaying? Maybe don't understand transaction?
Posted on 12/14/15 at 11:22 am to CHiPs25
I'm more interested on hearing if your dentist took the 50% offer or not?
Posted on 12/14/15 at 11:24 am to iknowmorethanyou
quote:
I'm more interested on hearing if your dentist took the 50% offer or not?
Hah, everything turned out ok for both parties.
Posted on 12/14/15 at 11:25 am to iknowmorethanyou
quote:
I'm more interested on hearing if your dentist took the 50% offer or not?
Posted on 12/14/15 at 11:35 am to CHiPs25
Happened to me on Williams stock
Posted on 12/14/15 at 12:11 pm to CHiPs25
Usually there is a winner and a loser in an acquisition. Without knowing anything about this instance, they could be paying too great of a premium.
I would bet Jarden Inc. has had a good day.
I would bet Jarden Inc. has had a good day.
Posted on 12/14/15 at 12:21 pm to wutangfinancial
Risk arbitrage. Investor will buy the target and sell the acquirer up to a point where the target gets near the deal price (its current price + the acquisition premium). How close it gets to the deal price is reflective of the risk of the deal not going through, i.e. if stock is $10, acquirer is paying $14/share for it, market will bid target's stock price close to $14, bc that's what they'll get in value upon closing of the transaction.
Posted on 12/14/15 at 12:50 pm to raw dog
Ya I almost went there. Lot's of hedge funds participate in Merger arbitrage but I'm not very knowledgeable on the subject to speak on it 
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