Dell LBO: fair price?

Quote from Surprise:

What other options Dell has , for the upside ? Thinking to play with OTM options here .
More...

I think that Southeastern Asset Management and Icahn are looking for a small improvement like 10-12%=>$15

So you can a make bull spread-call either like this (depending on how long you believe it will take to sweeten the deal):

1.Long a call @ $14 and short a call @ $15 expiration Aug/16/2013

You are net debit 0.67-0.25=$0.42
Breakeven @$14.67
Maximum return-> 0.33/0.42= 78.57%

2.Long a call @ $13 and short a call @ $15 expiration Jan/17/2014

You are net debit of 1.53-0.37=$1.16
Breakeven @ $14.53
Max return 0.47/1.16= 40.51%
 
Quote from freddel:

I think that Southeastern Asset Management and Icahn are looking for a small improvement like 10-12%=>$15

So you can a make bull spread-call either like this (depending on how long you believe it will take to sweeten the deal):

1.Long a call @ $14 and short a call @ $15 expiration Aug/16/2013

You are net debit 0.67-0.25=$0.42
Breakeven @$14.67
Maximum return-> 0.33/0.42= 78.57%

2.Long a call @ $13 and short a call @ $15 expiration Jan/17/2014

You are net debit of 1.53-0.37=$1.16
Breakeven @ $14.53
Max return 0.47/1.16= 40.51%
More...

If you assign a probability of success of 75%
The expected payoff is:

*Expiration Aug/16/2013
0.75x0.33=0.2475
(0.25x0.42=0.105)
=0.1425

*Expiration Jan/17/2014
0.75x0.47=0.3525
(0.25x1.16=0.29)
=0.06

Now if you are conservative and assign a probability of success of 60%
The expected payoff is:

*Expiration Aug/16/2013
0.6x0.33=0.198
(0.4x0.42=0.168)
=0.03

*Expiration Jan/17/2014
0.6x0.47=0.282
(0.4x1.16=0.464)
= -0.182

And if you are more bearish you can make the opposite trade
 
Quote from freddel:

If you assign a probability of success of 75%
The expected payoff is:

*Expiration Aug/16/2013
0.75x0.33=0.2475
(0.25x0.42=0.105)
=0.1425

*Expiration Jan/17/2014
0.75x0.47=0.3525
(0.25x1.16=0.29)
=0.06

Now if you are conservative and assign a probability of success of 60%
The expected payoff is:

*Expiration Aug/16/2013
0.6x0.33=0.198
(0.4x0.42=0.168)
=0.03

*Expiration Jan/17/2014
0.6x0.47=0.282
(0.4x1.16=0.464)
= -0.182

And if you are more bearish you can make the opposite trade
More...

Thanks mate , i was thinking of a more aggressive approach but apparently the upside is limited we are already trading under 15 , so i am left out with the downside but is it really going to go back to $10 hmmm
 
"At least five analysts see the buyout group increasing the bid to as much as $14.90 to $15 a share. At $15, Dell still would be going private at about 5.4 times profit, the lowest multiple for a technology buyout larger than $1 billion, according to data compiled by Bloomberg."

"Analysts from Jefferies Group LLC, Mizuho Financial Group Inc., Sterne Agee and GFI Group Inc. said a deal may get done at $15 a share, a 9.9 percent increase from the already agreed upon price."

http://www.bloomberg.com/news/2013-03-07/dell-bid-at-15-would-still-be-cheap-buyout-real-m-a.html
 
Wow don’t you see the strings?

Dell is a dinosaur in their industry (great company but you can’t outsource everything) but also a household name. It is only a matter of time before someone kills the beast. There is way too much competition to run a profitable business. Dell is going for the last big kill before the end. They go back to privately owned and then a few years later offer the IPO during a new bull market. It is a Big kill when everybody already trusts their brand.. After that the stock sucks the fortunes of moms and pop investors throughout the world as it falls into the hell they call the OTCBB or Pink Sheets… Michael LOL to the bank!

Genus of Michael Dell!

Back to flipping burgers I go….
 
Quote from Surprise:

@ 5.4 times profit :

How so ? i thought EPS is around 1.35 ?
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Here's the answer from Bloomberg:

"We're using EV to t12m Ebitda."



---
Sent From Bloomberg Mobile MSG

---- Original Message ----
From: <xxxx@gmail.com>
At: 3/9/2013 13:54

Dear XXX,

I would please to know how did you get a P/E multiple of 5.4?!

"At $15, Dell still would be going private at about 5.4 times profit, the
lowest multiple for a technology buyout larger than $1 billion, according to
data compiled by Bloomberg."
http://www.bloomberg.com/news/2013-03-07/dell-bid-at-15-would-still-be-cheap
-buyout-real-m-a.html#disqus_thread

The trailing P/E is 9.5 (14.16/1.49) and the leading P/E is 8.96
(14.16/1.58);
Your calculation implies an EPS of $2.62222 which 75.98% higher than the
trailing PE and 75.98% higher than the leading PE.

Best regards
 
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