Mergers and Acquisitions

Avoiding SIRI-Pandora M&A Arb Play

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So the announced deal gives Pandora (P) holders 1.44 shares of SiriusXM (SIRI) post-deal newly issued shares.  At current SIRI levels, that’s maybe $10+ per P share.  In my opinion, SiriusXM will keep dropping in price as more and more investors realize that $3.5B for Pandora is way overpriced and the new company will have to digest the deal going forward.  Since it’s not a cash buyout, as SiriusXM’s share prices falls (or rises), so does the relative value of the deal; leaving new Pandora shareholders (M&A players) left holding the bag in the case of the former.  Just over one month ago, there were estimates of Pandora fair value at around $6-$8 per share.  I am avoiding, as I think Pandora shares will drop even further below the current $9/sh level.  This does not look like a good arbitrage opportunity to me.