This is the weekly Merger Arbitrage Performance Review – March 21, 2021. This report focusses on the performance of the SOGO merger arbitrage spreads during the period 15th March – 19th March. These stocks were selected from the weekly largest top 20 investable US cash based merger spreads that was available as at 14th March, immediately prior to the analysis period. Investors and traders can follow the latest Top 20 (T20) list each week compiled by Merger Arbitrage Limited to review this week’s largest pending cash merger arbitrage spreads. Regular followers will already be familiar with our rules for inclusion in the T20 Index.
Following the performance table of investment returns, the first section of this report compares and reviews the performance of the broader market with the MNA. Then we more specifically discuss the performance of the overall T20 Index. The next sections detail the biggest winners & losers from the T20 portfolio followed by the conclusion. The information contained in this weekly Merger Arbitrage Performance Review – March 21, 2021 assists traders in making merger arbitrage investments and event driven trading decisions. Click this link for the archive of spread performance reviews from previous weeks.
Additional live news updates for these deals can be found on our customized T20 Index news feed. Even more specific merger details & news can be found on the dedicated news and merger factsheet pages including popular deals such as GLUU, LITE–COHR, CHNG, AJRD & TLRY–APHA.
Table of Returns
Merger Arbitrage Performance Review - March 21, 2021
| Merger Arbitrage Limited | The Market | ||
|---|---|---|---|
| Product | Weekly Change | Product | Weekly Change |
| T20 Index | 0.14% | SPY | 0.84% |
| Index Dispersion | 0.56% | VIX | 1.26% |
| Winners | 14 | MNA | 0.12% |
| Losers | 6 | ||
Market Performance Review
By the close on Friday, the SPDR S&P 500 ETF (SPY) index fund had moved lower by 0.84%. Accordingly, the VIX responded by moving higher and by the end of the week was up 1.26%. The IQ Merger Arbitrage ETF (MNA) also had a negative week. Losses in Xilinx (XLNX) and Inphi (IPHI) were at the forefront of the decline as their respective acquirer stocks declined in line with the tech sector. CIT Group however continued to improve on last week’s strong performance and moved ahead by an additional 0.27%. By the close on Friday, the ETF was showing a loss of 0.12%. The fund now resides in negative territory for the calendar year showing a loss of 1.59%
Merger Arbitrage Portfolio Performance Review
Cash merger arbitrage spreads as measured by the Merger Arbitrage Limited T20 Index posted a positive return in response to the broader market decline. The gain was in large part due to the sizeable improvement in PNM Resources (PNM) along with SOGO (SOGO).
There were no deal closures during the week although Sina Corporation (SINA) is expected to be delisted on Monday following successful completition of the deal. Magellan Health (MGLN), Cincinnati Bell (CBB) & Varian Medical (VAR) were also removed as their spreads were no longer amongst the largest top 20 merger arbitrage spreads. More spread details about this week’s index list can be found on our Spread Tracker page.
The T20 index had a rather sedate week displaying little volatility. A minor recovery on Friday however enable the index to close up for the period by 0.14%. The index was comprised of a complete complement of 20 merger arbitrage cash deals. Despite the negative performance, winners outpaced by the losers by a margin of 14 to 6 with 0 non-movers. The standard deviation of the individual index returns was 0.56%. This figure is significantly below the long term and moderately below the medium term averages.
Merger Arbitrage Performance Review - March 21, 2021
PNM Resources (PNM)
By the close on Friday had finished higher by $0.72, at $48.9, a rise of 1.49%. This leaves the simple spread at 4.91%.
Sogou (SOGO)
By the close on Friday, the stock had finished higher by $0.06, at $8.23, a gain of 0.73%. This leaves the simple spread at 9.36%, and is still the third largest in the index.
Aerojet Rocketdyne (AJRD)
Following a previous drop, we stated we had initiated a small position in this stock which is no longer showing a profit. We are however happy to maintain the position for the time being. By the end of the week, the stock finished lower by $0.55 at $46.61, a fall of 1.17% against an offer price of $51. This leaves the simple spread at a healthy 9.42% due to the long deal closing timeline, (2H, 2021), the second highest in the index.
Change Healthcare (CHNG)
We continue to hold our position in this stock. As mentioned previously, should the spread subsequently narrow, we will look to bank some profits and take our money off the table. By the end of the week, the stock finished down $0.15 at $22.75, a fall of 0.66% against an offer price of $25.75. This leaves the simple spread at an attractive 13.19% and is the highest in our merger arbitrage index.
