Score Media and Gaming (TSXV:SCR)(NASDAQ:SCR) had a swift and astonishing rebound yesterday. After losing nearly roughly 64% of its value from February, theScore stock jumped 70% yesterday after an acquisition deal was announced.
For many long-term investors, this deal validates their conviction in the stock and cements their profits. It also presents an opportunity for traders to make a quick buck. Here’s a closer look at the acquisition deal and what this means for theScore’s stockholders.
theScore stock details
Pennsylvania-based casino giant Penn National Gaming reached out to theScore with a buyout offer yesterday. The deal is worth US$2 billion, or CA$2.5 billion — much higher than what theScore stock was worth just a few days ago.
However, the deal isn’t all cash. This means investors and stockholders need to take a closer look at the fine print to figure out how to maximize gains. The deal offers US$17 (CA$21.33) in cash per share and 0.2398 shares of Penn’s common stock for each theScore share.
When the deal is completed, theScore stock will be delisted. Shareholders will be given the cash and Penn stock as planned. However, Penn stock has already jumped because of the announcement. It’s now trading for US$72, which means 0.2398 is worth roughly CA$21.7 in cash. Put simply, the combined value of the deal is $43 per share currently.
However, theScore stock is currently trading for just $40.8 at the time of writing. That means shareholders have little more room for upside. It could also be an opportunity for traders to make a quick buck via arbitrage.
Arbitrage opportunities in merger and acquisition deals are not uncommon. However, most of these opportunities are small, rare, and fleeting.
At the moment, it certainly seems like theScore stock offers a chance to make a tiny profit. Traders could acquire the shares at market price — $40.8 — today. When the deal is completed, they can sell Penn stock to capture roughly $3 in profit. That’s a return of roughly 7%.
However, for this strategy to work, Penn stock needs to either remain stable or appreciate by the time the deal is completed. Traders will also have to account for currency conversion and taxes along the way.
Penn’s offer to buy Score Media and Gaming is the ideal rescue deal. It helps Penn gain access to the popular Score app and media assets, while bailing out Score stock investors who’ve been losing capital throughout the year.
The stock is currently trading 7% below its full deal value. That presents an opportunity for traders looking to make a quick buck. It’s also a good opportunity for potential investors who want exposure to Penn stock. Penn is a market leader in the burgeoning legal gambling and sports betting sector across North America. Buying the stock indirectly at a mild discount could be a good idea for some.
This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
The Motley Fool has no position in any of the stocks mentioned. Fool contributor Vishesh Raisinghani has no position in any of the stocks mentioned.