This is the weekly Merger Arbitrage Performance Review – April 11, 2021. This report focusses on the performance of the TPCO, CCRC, MX, WDR & SOGO merger arbitrage spreads during the period 5th April – 9nd April. These stocks were selected from the weekly largest top 20 investable US cash based merger spreads that was available as at 4th April, 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 – April 11, 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, IIVI–COHR, CHNG, AJRD & TLRY–APHA.
Table of Returns
Merger Arbitrage Performance Review - April 11, 2021
| Merger Arbitrage Limited | The Market | ||
|---|---|---|---|
| Product | Weekly Change | Product | Weekly Change |
| T20 Index | 1.16% | SPY | 2.72% |
| Index Dispersion | 2.45% | VIX | 3.69% |
| Winners | 17 | MNA | 0.45% |
| Losers | 2 | ||
Market Performance Review
By the close on Friday, the SPDR S&P 500 ETF (SPY) index fund had stormed higher by 2.72%. Accordingly, the VIX responded by moving in the opposite direction and by the end of the week was down 3.69%. Like the S&P 500, the IQ Merger Arbitrage ETF (MNA) also had a positive week. As is so often the case, gains in Xilinx (XLNX) and Inphi (IPHI) were at the forefront of the rise as their respective acquirer stocks improved during the broader market rally. By the close on Friday, the ETF was showing a gain of 0.49%. The fund however still resides in negative territory for the calendar year showing a loss of 0.54%
Merger Arbitrage Portfolio Performance Review
Cash merger arbitrage spreads as measured by the Merger Arbitrage Limited T20 Index nesteled comfortably in positive territory throughout the week. The gain was in large part due to the recovery in Sogo (SOGO) following a recent announcement by the SAMR.
Pluralsight (PS) was one index member that saw its deal complete during the week along with MTS Systems (MTSC). We are still awaiting the conclusion of the Waterford (WTRE) deal which recently posted a successful shareholder vote. Michaels (MIK) is another deal that was removed from the index as the spread narrowed significantly. More spread details about this week’s index list can be found on our Spread Tracker page.
The T20 index once again had a rather more volatile week than lately. A recovery inline with the broader market on Friday enabled the index to close in of positive territory finishing up for the period by 1.16%. The index was comprised of a complete complement of 20 merger arbitrage cash deals. As expected with a negative performance, winners were outpaced by the losers by a margin of 17 to 2 with 1 non-mover. The standard deviation of the individual index returns was 2.45%. This figure is significantly above both the long term average and the medium term average.
Merger Arbitrage Performance Review - April 11, 2021
Sogou (SOGO)
By the close on Friday, the stock had finished higher by $0.83, at $8.530, a gain of 10.78%. This leaves the simple spread at 5.51%, and is now the largest in the index. The stock moved sharply higher as reports circulated that SAMR was about to grant approval for the deal. However, the stock had already moved higher during the previous two sessions BEFORE any news was released. However, we are happy to have had the courage of our convictions and shall enjoy basking in all our P&L glory.
As we have a slightly larger position than normal in theis stock, we will most likely look to take some profits during the week to reduce our exposure. This is in keeping with our proprietary risk management principles.
Magnachip Semiconductor (MX)
By the end of the week, the stock finished up $0.79 at $25.83, a rise of 3.15% against an offer price of $29. This still leaves the simple spread at 12.27% and is one of the highest in our merger arbitrage index.
China Customer Relations Centers (CCRC)
Following a previous drop, we initiated a small position in this stock at around the $6 level. We are happy to maintain the position for the time being. By the end of the week, the stock finished higher once again by $0.16 at $6.26, a rise of 2.62% against an offer price of $6.50. This leaves the simple spread at a healthy 3.83%. The deal is expected to close in 2Q, 2021.
Tribune Publishing (TPCO)
By the close on Friday TPCO had finished higher by $0.10, at $18.13, a rise of 1.66%. This leaves the simple spread at 0.93%. We already have a positon in this stock and shall await further news as we suspect a counter bid will be forthcoming.
Waddell & Reed Financial (WDR)
By the close on Friday, the stock had finished lower by $0.21, at $24.94, a loss of 0.83%. This leaves the simple spread at 1.26%. We no longer have a position in this stock but may initiate one following this pull back.
