Is this free money or not?

Question

Look here first:

https://www.parkviewfederal.com/news.asp?id=264

As you will see, if you are a shareholder as of 12/31/2007 of PVFC, you are going to get bought out at one of these prices:

1. $18.50 cash per share
2. $9.25 cash per share + 0.926 X (value of UCFC)

OR

3. 1.852 X (value of UCFC)

The question is, which one would an investor be getting? Clearly, option #1 is the best deal and option #3 is actually a BAD deal.

So, should I go ahead and buy the stock or not?

Actually, I'd have to buy the target company and short the acquiring company, right? This is like free money in the bank?

Obviously this is complicated, otherwise I wouldn't be asking a question. Also, I don't care about tax consequences - I care about making an easy profit or not.

Answer 1

Sounds great in hindsight (or almost hindsight). Yes, since PVFC is doing so poorly at the moment, it would make most sense to take option 1 if available.

The question is, is it? Typically, these deals have dealines by which selection of the options would need to be made. If you selected option 1 at the time, you're doing ok. If you made no selection, most likely you'll get option 3, shares of UCFC.

Right now, UCFC's at 5.66 and PVFC is at 10.95, so, option 3 gets you only 10.48 worth of UCFC stock.

My guess is we're now way past selection time and thus the valuations are as they are. But if not, definitely load up on PVFC and select the cash.

Perhaps contacting PVFC folks would clear it up. After all, it looks like the merger's been postponed as well until 1Q08 to complete!

[e-mail]
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440.248.7171


Hope that helps!

Answer 2

I would think you have to consider the tax implications of each alternative. If you take the cash, you may end up paying short term or long term capital gains tax (depending on how long you have owned the stock and assuming you have a profit). Option #3 is, in my opinion, probably tax free.
I am not an accountant so I would ask about the tax issues first.

Answer 3

Win the lottery. Walk round along with your head down and seem for difference that persons have dropped. Ask your mother. Inherit it from a wealthy relative. Other than that -- I are not able to suppose of whatever. Most folks who're adults appreciate that should you wish cash, you need to paintings for it and earn it. Sorry.

Answer 4

Sound a bit complicated. I think investing should be straightforward. Complicated stuff makes me heisitant to invest.