I see the potential and the risk. The only confusion I have is the disparity between the pricing of the common ADR and preferred ADR. Is this all because the preferred doesn't have tag along rights?
Author’s reply » Hi RY, the OIBR are worth exactl;y 92 % of the OIBRC. When the merger happens both shares will receive this ratio of newco shares. Why it trades like this..we do not know. Possibilities include shorters in Oi who are involuntary shorts in OIBRC after the exchange, and they are being called in. Investors who did the exchange are not sellers..( like ourselves) creating liquidity issues. Or people are afraid of a large reverse share split in only the preferred? It pretty much shows us there is no way of knowing but somehow I suspect something to do with shorting or a backfired arbitrage. The OIBR are the same exact shares at a .92 ratio but do not have a vote, liquidation preference or cumulative dividend. They are only preferred in regards to getting their dividend first, then the common receives the same and then they split the rest 50-50. So just buy the OIBR if you are buying
I must have this backwards. So the OIBR are the preferred shares and the OIBR-C are the common shares? The info below is from the recent SA article.
Merger between OI & TIM Participacoes
We reiterate our R$ 24.75 ($6.50 USD) target for the Oi Telecom common shares (NYSE:OIBR) and initiate the bonds of Oi with a buy.
First of all we should explain that is not a penny stock by definition although it trades for cents. This is due in part to the crash in the Brazilian stock market, the Brazilian Real and a loss of confidence in the company over the last year. Oi is one of the largest phone companies in the world and we believe that its value is intact. Our price - $6.50 - may seem high but this target is the result of several intersecting valuation methodologies: