From the 8-K filing with the SEC:
The price for the stock in the transaction is $65.2650.
They are calling it a merger and WhatsApp capital stock will be cancelled in exchange for 183,865,778 shares of Facebook Class A common stock , $4 billion in cash, and 45,966,444 restricted stock units.
They have until August 19, 2014 for the deal to close. If the deal does not close for reason specified like regulatory approval, FB will pay WhatsApp $1B and give them $1B in stock.
Value at todays closing price of 68.06 is $19.64B.
Good luck everyone
There are not outstanding shares held in the treasury. There are shares held on a "shelf" that can be used for things like this or a secondary but they are not outstanding until a transaction like this sale or a secondary happens. Options are not outstanding. Rsu's are not outstanding shares but when they vest they are dilutive and when they are exercised they become outstanding..
This is not a free transaction. There will be about 10% dilution.
What makes it undervalued? How much should the contract be worth? It is over 25% on a close to $70 stock 3 dollars itm. True delta will be around .70 to .90.
Friday is an OE with many calls ITM. There is a small flag so if FB breaks out of its range then it can escape some of the gravity of the option positions being unwound. If it is range bound until Friday, there could be a drop as it breaks from the range and the OE arbitrage players cause it to drop.
FB needs good momentum to escape the gravity of Friday with very large OI.
Good luck and good trading
Leaps ATM would provide you with approximately 3 to 1 leverage for 65 strike Jan 16's (time value included). That is good around your conviction. If you believe that FB will hit 110, then your profit will be around $45.
One word of advice is that you can profit a lot from the leverage and the LEAPS are much safer but the same leverage can create increased losses. It has been my experience that it is good to pare the position as you go. This just keeps your investment going if there is a big downturn. It also allows you to take profit. You can use a couple methods to do this.
One is to write higher calls with a expiry of a couple of months about $15 above your leaps. This is like writing a covered call but it really is an options spread. This would be called a diagonal spread but your conviction is not diagonal. With this there is more trading and rolling and you have to pick a position that would net you the same as if you sold at that time. If the stock flat lines, you basically paid off your time value.
Two is to just sell a percentage about every quarter. You can also have profitability goals. However, if you want to mitigate risk, you need to divest over time.
With that said, maybe you just want to let it ride and see what you can do. I would suggest that if you do this that you role your options near or close to ATM. If you have any questions, just ask. I would be happy to help you.
Forward PE of 40 is the end of 2015 and your point is? (I really don't know what your point is on trailing PE) The analysts expect the revenue for 2015 to be 14.74 billion........Not for EBITDA to be 15B.
Just so there is a point of reference that is about double 2013 rev which is 100% growth not 300%. The analysts would not consider 300% growth reasonable. You can calculate your own growth but it is not the same as the analysts therefore it is not reasonable?
You can use EBITDA to measure a companies profitability but you cannot use it to value a stock's share price. PE is a comparative measures......EBITDA is not.
30% of EBITDA is what compared to other companies? Why is it a reasonable measure when other companies are compared on PE?
FB is not a value stock and you cannot compare it on a value metric.
44.88 billion is a net income after taxes after depreciation, after interest and after amortization. Overheard has nothing to do with this as it is an income not EBITDA. Can you compare 15B EBITDA with an actual income of 44.88B. It's a joke if you do.
Listen.........FB is not a value stock and therefore will not have a PE of 13.
FB value will be based its growth story an how much the market believes in this growth story. A few notes though......
It will not grow 300% in 12-24 months.
Valuing a stock before they pay taxes is not a valid way to compare stocks. There is no such thing as price to ebitda ratio. Think about it. Your metric has never been used by any analyst ever.
FB's value will be based on how much the market believes it will grow. When FB gets closer to the value of MSFT, and GOOG, they will have some comparisons made.
Please note: Companies pay taxes, depreciate, amortize and even sometimes deduct interest. The amount that was taken out before income was 2.439B and they reported 1.491B. So 3.93B is just like an income? Of course not. EBITDA has no multiples and is not a metric that is used so it cannot be used to compare stocks....................PERIOD!
Hey Manny, where did you come up with those metrics? No one compares a stock on EBITDA. Why? Because companies depriciate, pay taxes, sometimes they have interest and amortization that they deduct. FB's income was 1.491B. 30 times earnings is what?
FB is project to have growth of 42% and you are projecting 300% EBITDA growth which basically means that they have to grow the top and bottom line by that much. Is 300% growth reasonable? No it isn't.
FB is not a value stock and you cant put it on a value metric. On top of that you cant multiply a earnings metric to something like EBITDA which is much larger than the reported income and expect it to hold water.
I am not commenting on where FB should or shouldn't be. I am saying that your calculations up and down the line are not valid way to value FB.
Sidestep if you will
A glance made imagined
Of ill intent and hatred masked.
An idea shall of its own will
Be what it is or not
So what am I to say.
As the moon shall follow
night time’s glance.
Yet itent’s delight
Is a merely a folly
As we think what we want.
It passes as it is
And someone smiles
As the other one frowns.
Are you kidding? 30% is about the top of a high beta $5.00 stock for ATM options. Y ou have have something mixed up. I used to study the IBD option charts in the 90's and look and try to calculate and find options that were over 25% until I found out they were few and far between. I scoured through thousands of contracts on thousands of of options looking for the magical number which was better than 30%. They don't exist and I will tell you why?
Now there is a reason you cant have an ATM option at 45% of the underlying. The reason is that it would allow a person to purchase a stock for 10% of the stock price. Now that is leverage! Here is how it works. You buy write and you can use the premium of the call to apply towards your purchase price. Lets say that we have a $10 stock and you want to buy 200 shares. You buy on margin so you pay $1000 and you borrow a $1000. You have a great idea and you will write calls on your 200 shares @ 45% and that is $900 which you can apply towards the purchase price. $1000 - $900=$100. If you don't think this exists, look up a buy write. 30% gives a person amazing leverage.
Does this not exist because tjhe option mm want to be a killjoy? No, and I will tell you why.
Think of the options exchange as a book. They keep the price so there is a match between writers and buyers. If there were options at 45% of the underlying's price, there would be far more writers than there would be buyers. Yeah, in my early trading days I schemed and finally read Mcmillan all 2000 pages and found out quite a bit and understood why I didn't become a billionaire trading options. I can quite assure you that 20% of a almost 70 dollar stock is a very high price for a stock that is $2 OTM. I studied this very extensively and know it like the back of my hand. I can tell you that the current price of the options is a very good price and is in no way undervalued. Good luck
That is probably a good idea. It looks like the option mm have it in their cross hairs. There have been a few algos but it keeps swinging down. Good luck and may your trade on Tuesday be great!
There are a fairly large amount of options itm. If FB gets a lot of volume it could escape the gravity but if it doesn't it could get pinned. The key is the long holiday and will there be enough volume to continue yesterday's rise. Good luck