I missed the sub $11 Gross sell off back in Sept. I won't miss this one.
I've heard all the negatives for years... crazy premium to NAV, return of capital, unsustainable payout, etc., etc. I look at this as an income only annuity with no death benefit. Just keep paying me every month and I'll try not to stress out over share price volatility.
At this point I'll take solvency. Price action is indicating that LINE will be a casualty of oil crash.
1) Continued concern over FTC rejection. If merger is approved , RAI and MO will own almost 85% of American cigarette sales. Even with required brand sell-offs, giving only two suppliers that much pricing leverage might be just too much for regulators to allow.
2) LO's earnings results on October 23 may contain an ugly surprise re Newport declining margins
You can buy a March 65 call for about $1.00. If the deal goes forward as stated you would likely profit from this trade.
It gives you the right to purchase 100 shares of LO at $65/ share up until the third Friday of March 2015. It is a contract and does not represent actual stock ownership nor entitle you to any dividends paid to shareholders. You can lose your entire investment if LO closes below the strike (65) at expiration. You will need to complete a form with you brokerage firm that certifies that you understand the risks of option trading. You also need sufficient margin buying power in your account to cover the purchase of the option.
every message board has a resident nitwit. They're pathetic attention seeking souls who's posts are disconnected with reality. If you don't engage him he'll go somewhere else to annoy people.
I'll take a stab at your question.
I believe the FTC will indicate conditional approval around late November. It will require some further brand tweaking and the final footprint of the deal will be in place before year's end. Most importantly the originally announced share allocation will remain fully intact.
Full disclosure: I am long LO
The request for more info is a fairly routine FTC MO. But I won't minimize my concern over possible addition requirements to shed brands. If the new RAI-LO is too stripped of their best sellers it may not be worth owning. Do I really want 8 or 9 months of stress? Whenever the value of my investment is too closely linked to government decisions I get real nervous.
You can use your LO divvy to buy the Jan 2015 53.33 put for about .80. By then we could have a more clearer feel for regulatory approval. An awful lot of smart anti-trust folks worked on this to prepare for FTC eyeballs, but a little put protection is always handy for a good nights sleep. Whoever said this merger play wasn't a get rich quick trade was right on. But successful investing is never easy money.
I don't understand what you're saying. I'm using the current price of RAI (57.75). Where do you get 24.74??
100 shares of LO will be exchanged for .2909 of RAI, giving you 29.09 RAI shares. If your point is that RAI stock may go down precipitously between now and the time of deal completion that's an opinion and of course would reduce the value of 100 RAI. The $5,050 is the cash portion of the 100 LO. But your smart enough to know that so I remain puzzled as to what you say.
Here's what 1 share of LO is worth as of today's valuation with no hype or emotion
Equity: $16.81 (57.80 x .2909)
*******these are the facts of RAI's offer to purchase this asset****
why does the market price LO at 59 as I write this ?
Uncertainty of FTC approval. PERIOD. If you feel the FTC will conclude that the efforts of the transacting parties have successfully insured that no new combined entity will gain an unfair pricing advantage you are passing on a winning investment. That is the issue as simply as I can state it.
A simpler option approach is to sell the Oct 60 put for 1.25 and buy the Oct 59 put for .80
You take in the .45 credit and your risk is getting the stock 'put' to you @ 60 with protection below 59.
But here's the easiest strategy: Buy LO before the end of tomorrow (8/26) and collect the .61 divy and wait (and hope) the deal completes next year. You'll get 2 more payments and appreciation up to 67 based on today's RAI close. Of course the wildcard is successful completion of the deal.
And I'm beginning to think regulatory approval is now more than 70% likely. Don't ask how I arrived at these odds.
I agree that FDA action against menthol is highly unlikely. For me, the much greater concern is FTC action against RAI-LO merger due to market share concerns. Historically US anti-trust regulators do not view kindly at foreign companies stepping in to maintain competitive balance. FTC go-ahead is predicated on BRITISH AMERICAN TOBACCO's significant investment in domestic market. This is what makes approval so iffy, IMO.
Consolidation of KMR and KMP results in 12% premium for them but it looks like acquirer will be punished.
KMI shareholders are left without an invitation to the party, at least in the short term.