This post was just published on ZYX Buy Change Alert.
RAD is long from $4.95. As of this writing it is trading at $7.37. RAD has a buyout offer from WBA for $9 cash. The stock is trading at a substantial discount to the offer because of the concern that the government will not approve the buyout. Yesterday, WBA on its earnings conference call stated that they are confident of an approval of the buyout by the government.
Previously, WBA has stated that it would be open to divesting up to 1000 stores to gain approval. On the conference call, WBA stated that it may be able to gain approval by divesting only 500 stores.
If WBA’s increased confidence is real, then there is a lucrative opportunity to buy RAD right here. However in our analysis, there is no way to tell if this is simply posturing or the increased confidence real.
In the big picture, if the buyout is approved, in the U. S. drug store business there will be a duopoly between WBA and CVS. Hence the concern about the merger not being approved is legitimate.
What To Do Now
Those in the stock may continue to hold.
Those not in the stock and are conservative may consider staying away from the stock at this time.
Those not in the stock and are aggressive may consider accumulating up to 20% of the full core position size right here with the intention of adding more if the merger is not approved and the stock falls.
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