Monday, March 05, 2007

Arbitrage Opportunity(MCBF)


"The Board of Directors of Monarch Community Bancorp, Inc. (NasdaqCM:MCBF - News) announced today that it has preliminarily approved a going private merger transaction in which holders of less than 1,000 shares of the Company's common stock would receive $13.50 in cash for each share of Company common stock that they held prior to merger. Stockholders owning 1,000 shares or more will continue to hold their shares. The last sales price for a share of Monarch common stock prior to announcement of this transaction was $10.60 on February 15, 2007".

Even though this post is slightly late, this just shows that arbitrage opportunities are lurking around,waiting to be spotted by investors with a sharp eye.As of 6th March 2007, the current price of MCBF is trading at 11.80, so there is still possibility of making a decent profit on this trade.If we bought the stock at 11.80 and received 13.50 in cash once the merger is completed , then

Net Return=13.50-11.80/11.80=14.4%

Not bad for an arbitrage!

Saturday, March 03, 2007

Motorola and Icahn

In recent years, Motorola has improved its market share from 14 % to 22 % globally.Despite that, earnings last year fell about 20% from previous years even though sales increased by 22% to 42.9billion.This could be possibly due to its aggressive marking down the prices of its flagship products eg razr.Selling such products would have a detrimental effect on profit margins.Also, another factor is the excessive compensation package CEO Zander received last year. In spite of a poor performance and disappointing earnings, he was paid a whopping 13 million.Clearly,management is not working in the best interests of its shareholders.

Now,recently Icahn has bought a massive stake in the company (about 2 billion in Motorola stock).His sentiment is Motorola stock is undervalued and plans to push through an aggressive share buyback.Given his track record, he will able to find much support among the disgruntled Motorola shareholders and push through his ambitious goals.This probably can be viewed as a catalyst for unlocking shareholder value and give a boost to its sluggish stock price.