You are all calculating this in the wrong way in my opinion. Keep it simple. If the merger and everything contemplated as part of the deal his through, then at the end of the day Softbank ends up with 3,241,000,000 shares of NEW SPRINT, in exchange for a grand total investment of $20,400,000,000. So, at the end of the day, Softbank is, in essence, paying $6.29 per share for the NEW SPRINT that will emerge after the deal.
Assuming the proration happens, you, as Joe Blow shareholder with 10,000 shares of CURRENT SPRINT would get $7.30 x 550 shares, for a total of $4,015, plus 450 shares of NEW SPRINT. If you price those shares of NEW SPRINT as being worth the same thing that Softbank is paying for shares of NEW SPRINT, they would be worth $6.29 x 450, or $2,830.50. Put it all together, and you are getting $4,015 cash plus shares in NEW SPRINT that Softbank implicitly valued at at least $2,830.50, or a total of $6,845,50.
so, in essence, Softbank is offering you, the individual investor, $6.845 per share of CURRENT SPRINT to cash out. That is absolutely a premium over current share price of about $5.75, and still let's you participate in the upside if NEW SPRINT does well.
Sentiment: Strong Buy
Exactly. The new shares are priced at $5.25 and the cashed shares are worth $7.30 for a combined valuation of approx $6.29.
As I stated before, this is the number investors should be focused upon. Why? Taxes.
It is futile to be predicting what the market will value New Sprint on the opening day of the new entity. Nobody knows what that will be any more than they could predict what the market will value any stock on any day in any market.
When you elect to accept the shares in New Sprint, your basis is $5.25. Period. If you cashed out 55% of your shares (and this only in the event that ALL shareholders elect to cash out) then you will have a tax liability computed on your basis of 55% of your Old Sprint shares and $7.30
You then have shares (45% of your old Sprint shares) in a new corporation and those shares are valued at $5.25 and your old basis for those shares is wiped out under Section 351 of the Internal Revenue Code.
Given that some institutional holders have 10s of millions of shares at stake, you can bet that they will be looking at the tax implications of this deal based upon their Tax basis. If you are a holder of 10s of millions of shares that you bought below $5.23 then you may want to elect to take the share swap since your basis will now be higher than it was before.
Keep in mind that the 55/45 deal isn't based upon YOUR shares, it's based upon the entire population of shares. So, if the preponderance of shares are elected to take a share swap, and a fewer number (less than 55%) elect to take cash, you could possibly end up being able to sell more than 55% of your shares at $7.30
Regardless as to how this all ultimately comes out - the value you receive is pegged at approx $6.29 - $6.38 and that is a fact. Legally binding agreement.
Next step is the vote. Votes will be driven by tax implications mostly IMHO. If the current administration retains office, they are going to go after capital gains and dividends. This will affect both large and small investors. So, the political election will weigh on the tax implications and the decisions of all players in deal.
I'm with Greek. If we could get a higher offer, I'm all for that. But for now, this is what we have.
"Regardless as to how this all ultimately comes out - the value you receive is pegged at approx $6.29 - $6.38 and that is a fact."
This is part of what I am disputing. Assuming the 55/45 proration and 10,000 shares of sprint as it exists today, you get:
.55 * $7.30 * 10,000 = $40,150
.45 * unknown future value per share of New Sprint * 10,000 = ?
But, as I explain at the outset of this thread, we know that Softbank is effectively paying $6.29 per share for New Sprint. So, if we assume that New Sprint will be worth as much per share as Softbank is paying for it, we get the following:
.55 * $7.30 * 10,000 = $40,150
.45 * $6.29 * 10,000 = $28,305
For a combined value of $68,455, which would come out to a value received for individual shareholders of just over $6.84 per share of current Sprint. So, substantially more value to current shareholders than $6.29, because that $6.29 figure is just what Softbank pays on average for its shares of New Sprint, not the average value they pay individual shareholders per share of current Sprint.
You ARE stooooooooooooopid. Or just trying to deceive the innocent.
You can THINK that they are buying 55% of your shares for $7.30 all you want. But you still fail to see that 55% of current shares really represents just 36.3% of the new share count. You receive $0 for the 34.2% that Hesse and Softdank has hussled behind closed doors.
The deal is real paying you;
70.5% of your shares at $5.72
29.5% of your shares become New Sprint shares
We'll spoken snuffy - appreciate your analysis.
As I posted earlier - at this point current valuation is largely irrelevant as the SoftBank deal is for all intents and purposes done and unless there is a material change it will be valued anywhere between the mid 5’s and low 6’s at time of closing.
Now the discussion really becomes “What is the potential of New Sprint?” If as some have reported there are only 3.5B shares outstanding (in New Sprint) I consider that a positive. Along with reduced debt levels and the 8B cash infusion, New Sprint should be in a pretty good position to accelerate their NV and LTE rollout which if executed upon properly should in turn hasten their return to profitability.
Yup. Whether you're a short or a long, these numbers are correct. If no_deal's skull is too thick for him to understand this it's his problem.
Keep in mind though that the value of new sprint is your assumption at this point. There is no guarantee. Good luck.
You are wrong again no_deal_clwr as usual but 8.0B goes directly to SPRINT as part of this deal. They could spend it on network build out much faster now and complete CLWR purchase if they desire which I believe will still happen and is part of this deal (unofficially)
Part of this money $3.1 B will count of SPRINT books for this Q3 earnings report.
Total investment is indeed $20.4 B so go take a nap....
Sentiment: Strong Buy
The day before the deal is announced Softbank has $20.4B lined up, and no shares of CURRENT SPRINT or NEW SPRINT. The day after everything contemplated in the deal is done, Softbank has $0 left from that $20.4B they lined up, zero shares of CURRENT SPRINT, 3,241,000,000 of NEW SPRINT, and nothing else. Keep it simple.
Bottom line is that they spend a combined total of $20.4B in share purchases, warrants, and convertible bonds, and they end up on the other side with nothing more or less to show for that $20.4B than 3,241,000,000 shares of NEW SPRINT. So they are paying $6.29 per share of NEW SPRINT, and that fact should be the starting point for the rest of us when trying to estimate where to value shares of NEW SPRINT.
All the machinations that happen with the $20.4B between now and closing is just a distraction from a big picture calculation; they spend $20.4B and wind up with 3,241,000,000 shares of NEW SPRINT.