I have a question regarding the answer!
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If Zega will be bought at a premium, why do not we sell it rather than buy it at a higher price?
They “believe” Zega shares will go up because of a take-over bid. Hence you should go long Zega shares.
but it says that it is already selling at a premium not that it is undervalued and will be selling at a premium later on. Do you get my point!
You misunderstand the timeline.SGC believes, and they anticipated. The answer says describes what happens if their belief is accurate.
Another short-term trading opportunity that Smith and Chan discuss involves the merger and acquisition market. SGS believes that Delta Corporation may make an unsolicited bid at a premium to the market price for all of the publicly traded shares of Zega, Inc. Zega’s market capitalization and capital structure are comparable to Delta’s; both firms are highly levered. It is anticipated that Delta will issue new equity along with 5- and 10-year senior unsecured debt to fund the acquisition, which will significantly increase its debt ratio.