10-31-2015, 05:02 PM
(This post was last modified: 10-31-2015, 05:05 PM by earthtodan.)
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
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