Profiting from Megamerger Mania đź’°

Profiting from Megamerger Mania! 

What do eBay, Louis Vuitton Moet Hennessy (LVMH), Charles Schwab, Fitbit, TD Ameritrade, and Tiffany all have in common? Cannibalism! It’s mergers galore, buyouts are in, and investors are looking for a way to play it!

Investors buy stocks for millions of reasons. One day, it’s an economic indicator — the next, rash conviction. In recent days, however, it’s been because companies are targeting other companies for acquisition, resulting in target firms’ stock prices rocketing. Thanks to tax reform and more cash to splash, the US Federal Trade Commission (FTC) has already wed 2.49-trillion-dollars’ worth of corporate couples this year.

As an example, fashion group LVMH got down on one knee to offer Tiffany & Co. $135 per share. She said yes, sending the jeweler’s shares up from $125 to $135. Charles Schwab also just bought TD Ameritrade in a goliath deal for the brokerage industry. Valued at $26 billion by Schwab, TD shares boomed 16%. The stock of the acquiring firm usually drops owing to the debt and uncertainty it saddles its investors with for a big sum. 

16% is still not bad for a day’s work, right? But these relationships rarely work out. The Harvard Business Review pegs their “failure” rate at 70-90%, due in large part to executives overpaying for “synergy”, and hence creating these gains. It’s not their money, after all!

So, how do we play this madness? Getting in front of the gravy train and speculating on the next target company to-be is a dangerous game of chicken if talks fall through (Google the downfall of ‘Long Term Capital Management’).

Some are resorting to smaller stocks in quieter markets where investors are slower to wake up to rumors of a potential buyout. Others are “shipping” companies they think belong together for strategic reasons, and some are even getting into the weeds with the third or fourth orders of effects after a confirmed merger. No matter what your approach, it’s nice to know that if all else fails, your portfolio is always open to an out-of-the-blue bailout!

Share:

More Posts

What is a kids brokerage account?

23 March, 2023

A kid’s brokerage account is more accurately called a custodial account. This is a brokerage account that parents or legal guardians can open on behalf of their child.

Load More
Get your daily Invstr Crunch

Get the market news and updates you need, delivered to your inbox or available on our daily podcast.

Facebook Twitter Youtube Instagram Snapchat Tiktok
learn
products
plan
Who we are
blog

Risk Disclosure:

Invstr is not a bank and banking services are provided by Vast Bank, N.A.

Brokerage and Banking services are currently only available to U.S. residents.

Invstr app and web services are provided by Invstr Ltd. Advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC) details of which can be obtained here. Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value.

Investing involves risk and can lead to losses. Past performance does not guarantee future results.

Invstr app and web services are provided by Invstr Ltd. Invstr+ advisory services are provided by Invstr Financial LLC, an investment adviser registered with the Securities Exchange Commission (SEC). Securities brokerage and custody services are provided by Apex Clearing, a broker dealer registered with the SEC and a member of FINRA and SIPC. There is no bank guarantee on securities and securities may lose value. Vast Bank N.A. a nationally chartered bank and member of the FDIC, provides the banking products, including the products and services related to digital asset accounts. As with any asset, the value of Digital assets can go up or down and there can be a substantial risk that you lose money buying or holding digital assets. You should carefully consider whether trading or holding Digital assets is suitable for you in light of your financial condition. Your digital account does not support wallet to wallet transferring of your digital assets (i.e. cryptocurrencies) outside the platform. Any Digital Assets in your digital asset account are not insured by any government entities, including but not limited to FDIC or SIPC. The Invstr Visa® Debit Card is issued by Vast Bank, N.A. pursuant to a license from Visa U.S.A Inc and may be used everywhere Visa debit cards are accepted. Invstr Ltd, Invstr Financial LLC and Invstr Securities Ltd are subsidiaries of Marketspringpad Holdings (collectively “Invstr”) and Invstr is solely responsible for the application services and website content.

Watchlists provided when users first access the service are not a recommendation to invest. Instead they are provided to help users better navigate the service. Users are free to edit and create their own watchlists. From time to time, Invstr will suggest instruments solely based on an individual’s interest and the interest levels of the Invstr community.The statistical and portfolio builder models generated by Invstr do not reflect actual investment results and are not guarantees of future results.Comments provided by Invstr leaders, influencers or members of the Invstr Community are not recommendations and should not be construed as such.Invstr does not endorse the content or the positions posted by them. Their investment approach, and that of the models provided by Invstr, may be different from yours and may not be appropriate for you.