74 - Merger Arbitrage: High returns from high certainty bets

Mental Models discussed in this podcast: Arbitrage Efficient Market Hypothesis Brand Power Luxury Power Please review and rate the podcast If you enjoyed this podcast and found it helpful, please consider leaving me a rating and review. Your feedback helps me to improve the podcast and grow the show's audience.  Follow me on Twitter and YouTube Twitter Handle: @TreyHenninger YouTube Channel: DIY Investing Support the Podcast on Patreon This is a podcast supported by listeners like you. If you'd like to support this podcast and help me to continue creating great investing content, please consider becoming a Patron at DIYInvesting.org/Patron. You can find out more information by listening to episode 11 of this podcast. Show Outline The full show notes for this episode are available at https://www.diyinvesting.org/Episode74 Merger Arbitrage - Examples and Discussion What is Merger Arbitrage? On November 24th, 2019, Louis Vuitton announced the acquisition of Tiffany for $135 per share. As of today's record, on April 18th, 2020, Tiffany was trading at $129.15. (4.5% gain to reach a takeover price of $135 per share) As of March 18th, 2020, Tiffany stock reached a low of below $112 per share. (represents a 20.5% gain to reach $135 takeover price) Very low-risk takeover. On the day of the announcement, shares rose to over $134 per share.  Summary:  Merger Arbitrage is an investing strategy designed to capture the value in price differences between a soon to be acquired company and the acquisition price. Investors can sometimes earn high returns at low risk using this strategy. References SpecialSituationInvestments.com @InvestSpecial on Twitter https://www.foxbusiness.com/markets/tiffany-stockholders-approve-merger-with-lvmh