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+--- Thread: GE offer to exchange for SYF shares at 7% discount (/showthread.php?tid=1384)
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GE offer to exchange for SYF shares at 7% discount - earthtodan - 10-31-2015
I received GE's offer of exchange for $107.53 of SYF shares for every $100 of GE shares I choose to trade in (based on near term market valuations), or up to 1.13 shares of SYF per share of GE. Without having an idea of which company will be the better investment going forward, my initial thought is this: Could the discount produce a cascading effect, where the 7% gets priced into SYF, upon which price the discount has to be applied, which then gets priced in again, etc...
However I'm sure GE thought this through much more thoroughly than I have, so I'm going to assume it works without causing some kind of dramatic market dislocation, which leaves me back at the original question of whether I want to exchange some or all of my approximately $6300 of GE stock. As of the close Friday it looks like the market has priced out about half of the discount.
I have an investment thesis on GE the industrial company, which is why I own it, and no particular thesis on SYF. The rapid retirement of GE shares through the spinoff and other asset sales should be good for GE shareholders. However my portfolio allocation is skewed toward industrials at 17% (vs 14% financials, of which about a third of that is V and MA which are quasi-financials). Plus I would feel like a fool if the SYF discount produces an easy 7% gain for people who accepted the trade and I did nothing. Maybe I'll go 50/50 and turn in half my position.
As an aside, there is the risk that if SYF is oversubscribed, the discount shrinks. If comments on Seeking Alpha are any indication, there are a lot of retail shareholders looking for a way out, so there might be a lot of demand for this trade, and the discount could narrow if the upper limit is reached.
Discuss
RE: GE offer to exchange for SYF shares at 7% discount - Dividendsrule - 10-31-2015
Tim has some high quality (as usual) articles on the subject.
http://theconservativeincomeinvestor.com/2015/10/31/how-does-the-general-electric-synchrony-exchange-work/
http://theconservativeincomeinvestor.com/2015/10/31/how-many-general-electric-shares-should-you-exchange-for-synchrony-financial/
I guess he suggests 25% exchange in the second article. I would recommend reading them.
I don't have a very large position in GE relative to my portfolio, so I'm just holding them tight, not really interested in SYF. I like GE's business. Weird battery power, water treatment, all sorts of stuff...
RE: GE offer to exchange for SYF shares at 7% discount - navyasw02 - 10-31-2015
I figure if GE doesnt want its financial arm, why should I? They know a lot more about it than I do and if it wasnt profitable they wouldnt be selling it...
RE: GE offer to exchange for SYF shares at 7% discount - earthtodan - 10-31-2015
(10-31-2015, 06:06 PM)Dividendsrule Wrote: Tim has some high quality (as usual) articles on the subject.
http://theconservativeincomeinvestor.com/2015/10/31/how-does-the-general-electric-synchrony-exchange-work/
http://theconservativeincomeinvestor.com/2015/10/31/how-many-general-electric-shares-should-you-exchange-for-synchrony-financial/
I guess he suggests 25% exchange in the second article. I would recommend reading them.
I like Tim's take, and I'm thinking I'll do an exchange of 1/3 of my position. Although I will say I'm surprised at his mischaracterization of V and MA, I'd think he'd understand the difference between these companies and lenders, and their relationship to those lenders.
(10-31-2015, 08:17 PM)navyasw02 Wrote: I figure if GE doesnt want its financial arm, why should I? They know a lot more about it than I do and if it wasnt profitable they wouldnt be selling it...
This is an easy way to deal with the problem, and in fact that's how I treated the spinoff of CCP from VTR (I sold my shares of CCP and bought more VTR). However it's not quite accurate. Synchrony Financial is profitable with a net income of $2.2b, though lower valued and slower growing. GE Financial also gives the company a SIFI designation. Breaking apart the financial assets and shedding this designation means that the sum of the parts is actually worth more than the whole.
RE: GE offer to exchange for SYF shares at 7% discount - earthtodan - 11-03-2015
I decided to pass on the tender offer. Aside from the fact that my broker would charge $30 to facilitate the exchange, it would be a speculative trade hoping for a quick gain on a company that I've never really wanted to own.
RE: GE offer to exchange for SYF shares at 7% discount - Jimbo - 11-03-2015
(11-03-2015, 01:00 PM)earthtodan Wrote: I decided to pass on the tender offer. Aside from the fact that my broker would charge $30 to facilitate the exchange, it would be a speculative trade hoping for a quick gain on a company that I've never really wanted to own.
Hi Dan,
Good for you.
I have decided to hold tight on ours also.
I know I am heavy on GE but, hopefully
"GE will bring good cash to light".
Jim
RE: GE offer to exchange for SYF shares at 7% discount - Dividendsrule - 11-03-2015
Yeah, no reason to sell GE for me either. Great businesses, international.
RE: GE offer to exchange for SYF shares at 7% discount - EricL - 11-03-2015
Kept my GE shares as well.
RE: GE offer to exchange for SYF shares at 7% discount - Rasec - 11-03-2015
Same, pretty small position to be diluting it even more.
RE: GE offer to exchange for SYF shares at 7% discount - rayray - 11-05-2015
Not parting with one share, Long GE.
Already invested in what I want within the financial sector.
RE: GE offer to exchange for SYF shares at 7% discount - kayboy - 11-06-2015
(11-05-2015, 11:12 PM)rayray Wrote: Not parting with one share, Long GE.
Already invested in what I want within the financial sector.
GE is one of the first stocks I ever bought (before learning about DGI). I held 750 shares at the time. But watching GE stay in a range-bound funk, I started looking for greener pastures.
Now that Nelson Peltz has seemed to breathe some life into the stock, I guess I'll hold on to the 482 remaining shares for a bit longer. It would be easier if the dividend wasn't frozen.
RE: GE offer to exchange for SYF shares at 7% discount - DividendGarden - 11-09-2015
I will hang on to my GE shares and not exchange them for the SYF shares.