Preview

FINN5333 Ubid

Satisfactory Essays
Open Document
Open Document
556 Words
Grammar
Grammar
Plagiarism
Plagiarism
Writing
Writing
Score
Score
FINN5333 Ubid
MALL – UBID arbitrage
Creative Computers
Ubid
Arbitrage – how it works
Hidden dangers

MALL vs. UBID


June 8, 1999




Each Creative Computers shareholder receives 0.7159 UBID share for 1 MALL share December 9, 1998



MALL price is $22.75
UBID price is $35.6875




0.7159*$35.6875 = $25.55

UBID is more expensive than MALL !!!

MALL-UBID arbitr

2

MALL – UBID arbitrage


December 9, 1998





Long 1 share of MALL at $22.75
Short 0.7159 shares of UBID at $25.55

This position is guarantees a “riskless” profit on June 8, 1999 !!!

MALL-UBID arbitr

3

Game Plan
Dec 9 1998

Jun 8 1999

Investment

Payoff

Long 1 share MALL

$

22.75

$

-

Short 0.7159 shares of UBID

$

(25.55)

$

-

Short Cash Proceeds*

$

25.55

$

25.55

Long Margin Loan (cash)

$

(11.38)

$

(11.77)

Short Margin Collateral (cash)

$

12.77

$

13.03

Net (equity)

$

24.15

$

26.81
11.00% <= 6m ROI

Interest on short proceeds**

0.00%

Margin loan interest - borrow

7.00%

Margin loan interest - lend

4.00%

* with broker
** rebate rate

MALL-UBID arbitr

4

Technical Details


Long Position
Assets

Liabilities and Equity

MALL (Long) value
Cash*


$ 22.75

Loan from broker***

$

11.38

Equity (Net Worth)

$

11.37

Short Position
Assets

Liabilities and Equity

UBID cash proceeds*

$ 25.55

UBID (Short) value

$

25.55

Cash margin**

$ 12.78

Equity (Net Worth)

$

12.78

MALL-UBID arbitr

5

Technical Details


Joint Balance Sheet
Assets

Liabilities and Equity

MALL (Long) value

$ 22.75

Loan from broker***

$

11.38

UBID cash proceeds*

$ 25.55

UBID (Short) value

$

25.55

Short margin**

$ 12.78

Equity

$

24.15

* with broker
** cash collateral
*** long margin loan
•

What Happens Next?...

MALL-UBID arbitr

6

MALL-UBID arbitr

7

MALL-UBID arbitr

8

MALL-UBID arbitr

9

Dec 18, 1998 – Margin Call


Joint Balance Sheet
Assets

Liabilities and Equity

MALL (Long) value

$ 28.88

Loan from broker***

$

11.38

UBID cash proceeds*

$ 25.55

UBID
Continue Reading
View Writing Issues

You May Also Find These Documents Helpful

  • Satisfactory Essays

    Bear Corporation and Transfer of Assets
    • 592 Words
    • 3 Pages

    Bear Corporation and Transfer of Assets

    Bob transferred equipment and receives a bear note of $ 10,000 (boot) that is due in three years and 300 shares of common stock. Bob will recognize a gain of the $ 10,000 note the lesser value of the gain of $15,000 from the transfer of equipment. However, the remaining gain of 5,000 (40,000 less 25,000 basis less 10,000 note) will be deferred to later years. The basis of equipment transferred in is $25,000 (25,000 plus 10,000 gain minus the receipt of note 10,000). (40,000 less 25,000 basis).…

    • 592 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Acc/531 Week 3 Balance Sheet Analysis
    • 522 Words
    • 3 Pages

    Acc/531 Week 3 Balance Sheet Analysis

    96 Balance Sheet 2004 2003 Edwards, Inc. has prepared the following comparative balance sheets Cash $198,000 $102,000 for 2003 and 2004: Receivables $106,000 $78,000 2004 2003 Inventory $100,000 $120,000 Prepaid expenses $12,000 $18,000 Cash $ 198,000 $102,000 Plant assets $840,000 $700,000 Receivables 106,000 78,000 Accumulated depreciation $(300,000) $(250,000) Inventory 100,000 120,000 Patent $102,000 $116,000 Prepaid expenses 12,000 18,000 $1,058,000 $884,000 Plant assets 840,000 700,000 Accounts payable $102,000 $112,000 Accumulated depreciation (300,000) (250,000) Accrued liabilities $40,000 $28,000 Patent 102,000 116,000 Mortgage payable $- $300,000 Preferred…

    • 522 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    101664305 ACC421 ACC 421 Week 4 Learning Team Assignments From the Text
    • 807 Words
    • 6 Pages

    101664305 ACC421 ACC 421 Week 4 Learning Team Assignments From the Text

    Acc/421 Week 4 Learning Team Assignments PROBLEM 5-3 Side Kicks Company Balance Sheet December 31, 2007 Assets Current assets Cash $ 41,000 Accounts receivable $163,500 Less: Allowance for uncertain accounts 8,700 154,800 Inventory—at LIFO cost 308,500 Prepaid insurance 5,900 Total existing assets $ 510,200 Long-term investments Investments in stocks and bonds, of which investments of $120,000 have been pledged as security for notes due—at fair value 339,000 Property, plant, and equipment Expenditure of unfinished plant facilities Land 85,000 Building in process of construction 124,000 209,000 Equipment 400,000 Less: Accum.…

    • 807 Words
    • 6 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    JCPenney
    • 247 Words
    • 7 Pages

    JCPenney

    The reasons for a change in ROCE are (1) an increase in interest expense, (2) an increase in debt,…

    • 247 Words
    • 7 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Week 4 acc421 Team Textbook Assignemtn
    • 893 Words
    • 4 Pages

    Week 4 acc421 Team Textbook Assignemtn

    What information regarding inventories and property, plant, and equipment must be disclosed by Koch Corporation in the audited financial statements issued to stockholders, either in the body or the notes, for the 2010–2011 fiscal year?…

    • 893 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    ACG Cup
    • 434 Words
    • 2 Pages

    ACG Cup

    Best Bank In Town Since 1872 Khakis ‘R Us Valuation MBA Investment Bankers LLC January, 2014 Executive Summary • Evaluation of NYC Capital Offer — Comparable Companies Analysis $24.64-$32.90 — Precedent Transaction Analysis $21.99-$30.43 — Discounted Cash Flow Analysis $25.03-$33.74 • Recommendations — Counteroffer $20/share + Earnout of 75% EBITDA over 3 years $25.18-$30.03 — Defensive Strategy Shareholder Rights Plan + Buyback — One Year From Now About Boots, Valuation Range Khakis ‘R Us & MBA Investment Bankers LLC Confidential 2 Comparable Company Analysis • Comparables determined by Revenue, EBITDA, and EBIT figures. •…

    • 434 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Fin Homework
    • 769 Words
    • 4 Pages

    Fin Homework

    1. Swim Suits Unlimited is in a highly seasonal business, and the following summary balance sheet data show its assets and liabilities at peak and off-peak seasons (in thousands of dollars):…

    • 769 Words
    • 4 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    Six Flags
    • 1211 Words
    • 3 Pages

    Six Flags

    We then took the implied enterprise value of the exchange offer of $1.7 billion and started distributing the value between the debt holders, starting at the most senior tranche of the capital structure. With the most senior class having a total claim of $1.1 Bn (less than the EV of $1.7 Bn), their respective recovery rate was 100%. Similarly, the second class’s claim of $420 Mn (with a cumulative claim including first and second classes of $1.53 Bn), had a recovery rate of 100%. We worked down the classes until we reached the breakpoint between SFO Notes and the SFI Notes. Everything above this breakpoint would have a 100% recovery, and then per the details of the exchange offer, we split the equity remaining among the SFI Notes, PIERS and the Common Stock (85%, 10%, and 5% respectively). This resulted in a recovery rate of 16.6% for the SFI Notes, and 5.5% for the PIERS. The Enterprise Value for the SFI Notes is $144.5 million, for the PIERS class $17.0 Mn and the common equity is $8.5 Mn. See Exhibit 1 in the Appendix for additional details.…

    • 1211 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Southwest Airlines Company Financial Analysis
    • 746 Words
    • 3 Pages

    Southwest Airlines Company Financial Analysis

    Over the past five years, Southwest Airlines has showed to be growing at a steady pace, with the exception of the economic crisis in 2009. As you could perceive in 2008 the company’s profit margin was 1.61%, in 2009 .96%, then in 2010 it when to a whopping 3.79%. Southwest Airlines continues to grow stronger year after year. Even with the economic crisis, Southwest continue to hire more and more employees. From 2008 Southwest had 35,499 employees. To 2011 it has 45,392 employees.…

    • 746 Words
    • 3 Pages
    Good Essays
    Read More
  • Good Essays

    Auditing: Revenue and Expense Forecast
    • 799 Words
    • 4 Pages

    Auditing: Revenue and Expense Forecast

    manufacturing and sales facilities. The company applied for a loan from First Bank, presenting the prior-…

    • 799 Words
    • 4 Pages
    Good Essays
    Read More
  • Satisfactory Essays

    Hurst Company Case Study
    • 653 Words
    • 3 Pages

    Hurst Company Case Study

    On December 31, 2008, Ramey Associates owned the following securities, held as a long-term investment. The securities are not held for influence or control of the investee.…

    • 653 Words
    • 3 Pages
    Satisfactory Essays
    Read More
  • Satisfactory Essays

    Microsoft and Oracle's Balance Sheets
    • 331 Words
    • 2 Pages

    Microsoft and Oracle's Balance Sheets

    After comparing these two corporations’ balance sheets, I found some information that may be valuable to make a lending decision. And I, as a credit analyst, have decided to recommend Oracle Inc. for this $400 million line of credit.…

    • 331 Words
    • 2 Pages
    Satisfactory Essays
    Read More
  • Good Essays

    research paper
    • 2528 Words
    • 15 Pages

    research paper

    Issued 6,000 shares of preferred stock to Thevenot Corporation for the following assets: equipment with…

    • 2528 Words
    • 15 Pages
    Good Essays
    Read More
  • Powerful Essays

    Balance Sheet and Income Statement
    • 2310 Words
    • 10 Pages

    Balance Sheet and Income Statement

    The following four companies are related to the companies that have been in review over the last four weeks. These four following companies show how well the company has been doing over the last two years or not so well. The company has pulled their balance sheets and income statement to see if all the company’s financial needs are being met. If the company’s needs are not being met, the company will show where the company needs to cut back and where the company needs to improve.…

    • 2310 Words
    • 10 Pages
    Powerful Essays
    Read More
  • Satisfactory Essays

    Assignment 1 Week 1
    • 152 Words
    • 3 Pages

    Assignment 1 Week 1

    Liquidation expenses are expected to be negligible. No interest accrues on loans with partners after termination of the business.…

    • 152 Words
    • 3 Pages
    Satisfactory Essays
    Read More

Related Topics