By Nigam Arora & Dr. Natasha Arora
195th Buyout
Airframe maker Spirit AeroSystems (SPR) has become the 195th Arora portfolio company to be bought out. Members who consistently invest in buyout targets have amassed a fortune over the years.
SPR core position is long from $18.20. The deal is at $37.25. This represents a gain of 105%.
The Deal And The News
The stock is trading lower for the following reasons:
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The deal will likely close in 2025.
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The deal is for stock and not cash. Here are the details:
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SPR stock will be converted to BA shares based on an exchange ratio of 0.18 – 0.25, which will be calculated as $37.25 divided by the volume weighted average BA share price over the 15 trading day period ending on the second trading day prior to the closing. If volume weighted average price is at or below $149.00, SPR stock will be converted to 0.25 BA shares for each SPR share. If the volume weighted average price is at or above $206.94, SPR stock will be converted to 0.18 BA shares for each SPR share.
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Some investors were concerned about the bad headline of criminal prosecution of BA. However, prudent investors should note the following from the earlier BA post:
The news headline is that the Department of Justice (DOJ) is criminally prosecuting BA. Many investors are selling on the headline.
In The Arora Report analysis, the deal the DOJ is offering BA is a sweetheart deal. The deal is better than The Arora Report expectations.
Higher Bid
There is a 20% probability of a higher bid from BA in due course.
What To Do Now
Investors should review the total quantity held in the following four positions relative to the total portfolio:
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SPR core position
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SPR trade around position
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BA core position
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BA trade around position
The bias should be towards holding. However, investors with a large quantity of a combination of the above positions may consider trimming on bounces.
Trade Around Positions
Trade around positions is a technique used by billionaires and hedge funds to maximize risk adjusted returns. To read more about trade around positions and other billionaire and hedge fund techniques, please fill out the form below.
Sophistication
The foregoing is an example of how bringing in more sophistication to your investing dramatically increases your profits and reduces your risks when consistently followed over a lifetime.
Buyouts are very lucrative for investors. Members of The Arora Report who consistently invest in buyout targets have made a fortune from buyouts. With 195 buyouts, the performance of The Arora Report is significantly better than firms charging upwards of $50,000 per year. With The Arora Report, you get so much more than buyouts.
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This post was just published on ZYX Buy Change Alert.
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Nigam Arora
Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.
Dr. Natasha Arora
Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.
