If the buyout, which by all accounts looks flimsy at best, is at 9 dollars... why are people still buying in to this stock at ~$8.50?
- If you short the stock and the deal doesn't go through, the stock will probably get cut in half and continue to free fall from there. You lose almost everything if you're long.
- If the deal does go through, you make a very very tiny profit if you're long. If you're short, you lose very very little (and if you shorted above 9, you're safe no matter what).
So why are there people who think that small profit is worth the risk of massive losses ? Why do so many people think there is going to be a bidding war? And why do some people think this stock should go for 20+ dollars for the next offer when the current bid is only 9 dollars? Why would another company would offer such a high premium, after the only offer BBRY could get was from a former owner after a year of looking for other bidders?
No company wants BBRY, yet some of the longs seem to think a corporate giant is going to hop out of left field and buy for more than twice the current bid?
I think you got it pretty much right. Those buying at these levels believe there will be other bidders and the buyout price will be higher than 9. Those short, think that the deal will fall through because they don't believe Prem will get financing in place. The argument is that cash and IP are worth more than 9/share but at the current burn rate that 3 Billion will turn into zero pretty quick. Layoffs and winding down the hardware business will be costly....getting financing for this deal will be tough. The BS will be loaded up with debt and the ability to repay that debt with plunging sales (in all business categories) is questionable.