Arbitrage Opportunity? Or dumb play?

[heavenskrow]

So I had a few shares of PCYC. Last month there was an acquisiton offer from ABBV for 1.$261.25 buyout cash offer, 2.Mix of $150.00 cash and ABBV stock or 3. all stock offer.

Currently PCYC is trading at 255.19.
Can't I just buy a ton of shares at this price, then tender my shares for the all cash offer and make a few dollars profit??

 

[Sig]

The delta between the buyout offer and the current trading price represents the market's consensus of the probability of the deal falling through. Its not a risk free arbitrage, because the merger might not happen, even after you tender your shares. At that point PCYC falls back to the $150 range or lower where it was trading before everyone got wind of a possible merger. So you have a high percentage chance of making about $6 a share and a low percentage chance of losing about $100/share. You have to do the math on the percentages to decide if you think its a good deal or not. Keep in mind that at this point you're doing something statistically very similar to naked selling a far out of the money put with a small and very probable payout but potential large loss. Not risk free arbitrage, more like picking up nickles in front of a steamroller.
The name of this field is "merger arbitrage" if you're looking for the right google search term. There are also a few mutual funds that focus on this strategy.