This is the weekly Merger Arbitrage Performance Review – April 18, 2021. This report focusses on the performance of the AJRD, CHNG, MX, & TLND merger arbitrage spreads during the period 12th April – 16th April. These stocks were selected from the weekly largest top 20 investable US cash based merger spreads that was available as at 11th 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 18, 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 18, 2021
| Merger Arbitrage Limited | The Market | ||
|---|---|---|---|
| Product | Weekly Change | Product | Weekly Change |
| T20 Index | 0.04% | SPY | 1.40% |
| Index Dispersion | 0.87% | VIX | 2.64% |
| Winners | 11 | MNA | 0.48% |
| Losers | 9 | ||
Market Performance Review
By the close on Friday, the SPDR S&P 500 ETF (SPY) index fund had stormed higher by 1.40%. Accordingly, the VIX responded by moving in the opposite direction and by the end of the week was down 2.64%. 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 0.48%. The fund however just still resides in negative territory for the calendar year showing a loss of 0.06%
Merger Arbitrage Portfolio Performance Review
Cash merger arbitrage spreads as measured by the Merger Arbitrage Limited T20 Index traversed the zero return line for much of the week and were just able to carve out a positive return by the close on Friday. The gain was in large part due to the advancement in AJRD and the mild recovery in CHNG.
A total of four deals were completed during the week by previous constituents of the T20 Index. Michaels (MIK), Varian Medical (VAR), Five Prime Therapeutics (FPRX) & Seacor Holdings (CKH) (finally) all closed sucessfully. We are still awaiting the conclusion of the Waterford (WTRE) deal which recently posted a successful shareholder vote. RealPage (RP) & GasLog (GLOG) were removed from the index as their spreads narrowed. 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 narrow week. A slight recovery inline with the broader market on Friday enabled the index to close in of positive territory finishing up for the period by 0.04%. The index was comprised of a complete complement of 20 merger arbitrage cash deals. As expected with a negative performance, winners outpaced the losers by a margin of 11 to 9 with 1 non-mover. The standard deviation of the individual index returns was 0.87%. This figure is below the long term average and exactly inline with the medium term average.
Merger Arbitrage Performance Review - April 18, 2021
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 higher by $0.79 at $48.53, a rise of 1.65% against an offer price of $51. This leaves the simple spread at just 5.09% due to the long deal closing timeline, (2H, 2021).
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 up $0.30 at $22.81, a rise of 1.33% against an offer price of $25.75. This still leaves the simple spread at an attractive 12.89% and is the second highest in our merger arbitrage index.
Magnachip Semiconductor (MX)
By the end of the week, the stock finished down $0.68 at $25.15, a fall of 2.63% against an offer price of $29. This now gives a simple spread at 15.31% and is the highest in our merger arbitrage index.
Talend (TLND)
By the end of the week, the stock finished down $0.74 at $63.96, a fall of 1.14% against an offer price of $66. However, this still only gives a simple spread of 3.19% and is roughly inline with the average of the merger arbitrage index.
