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Harbinger Group Inc. Message Board

  • EvanMacDonald EvanMacDonald Feb 18, 2011 4:40 PM Flag

    Arbitrage drying up

    Unfortunately, the arbitrage spread between this and SPB is closing through the wrong mechanism, with SPB stock coming down instead of HRG going up like many of us anticipated. There should still be about a dollar of arbitrage left in this trade, with them holding 27.5 million shares of SPB at $29 = $800m + $140m in cash = $940m/138m shares = $6.80.

    This leaves about a dollar in value, down from a spread that had been over $2 fairly recently, so I don't feel it's as compelling a play as it has been, especially since the above valuation is glossing over that fact that HRG sold 11% notes to raise an additional $350m, but that hasn't been put to work yet so they should have that added to their cash postion, they just have to figure out how they're going to use it to generate returns in excess of that high interest they'll have to pay.

12.32+0.07(+0.57%)Feb 27 4:03 PMEST

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