Now that GRFS has been issued, there is a big valuation gap between the "B" shares and the common which are sold through the GIKLY ADR - over 40%.
I would think a lot of selling is going on in GRFS by the arb players who just want to take their profits in the TLCR buyout and move on, but once this forced supply has been absorbed, I would expect this valuation to narrow and profits here. I think a valuation discount of about 10% seems to be on the high side, so 30% profit opportunity.
The GRFS were issued as "B" shares I believe in order to keep control within certain Spanish shareholders, but they actually have preferential treatment over the common shares in many ways other than the right to vote.
Be interested in hearing anyone else's thoughts on this.
GRFS, GIKLY, GRF.MC, and Grifols class B ALL have the same economic rights and in fact the Class B and Class B ADSs(GRFS) have an extra EUR 0.01 in dividend rights above the Class A albeit non-existent voting rights. They are trading at a huge discount because of an non-fundamental based event, i.e. Talecris shareholders selling because they either don't know what they own or don't want to own it.
Huge arbitrages like this have happened in the past, Chipotle and Discovery Communications comes to mind. In every case, whether by market actions or by corporate actions the spread ALWAYS converges. And even if one does exist, it certainly shouldn't be the 25% discount to the European shares that currently exist even adjusting for the company being foreign based. In fact if you read the merger prospectus the company fully expects all shares to trade more or less in line with each other.
I checked Bloomberg and there is no volume on the B shares in Europe - less than 40,000 shares today. It looks like the B shares are mainly trading on the Nasdaq and the Spanish ones are actually following, not leading.
Not sure how many B shares are available for trade in Spain.