There is a arbitrage risk spread in the stock now. The deal is for $50 pxp share. The closer we get to the deal closing the smaller the spread will be. Right now there is risk being valued into this deal at about 12.5%. This will continue to close the gap as the stock moves higher and closer to the deal closing. I am holding my PXP until it gets closer to $50, obviously.
I would hold or buy the stock for the 12% gain.
The offer is for $25 cash plus .6531 shares of FCX for every share of PXP. When they announced the offer, FCX was about 38.2, which would have valued each share of PXP at about $50. Since FCX stockholders have sold off their stock to 30.81 (as of now), that means each share of PXP is worth about 45.12 based on yesterday's closing prices. I'm not sure why we're at 43; maybe some investors think the deal might fall through.
Personally, I'm holding out for a higher price for PXP. If the deal falls through, so be it.
so u are willing to risk upside of $5 for a downside of say, $15 (if deal collapses)? granted the probabilities on upside is like 90% and 10% downside to $15... and these ratios that determine PXP price can go lot lower if FCX drops more...which i think is quite likely given the negative investor sentiment surrounding FCX deal.