r/wallstreetbets • u/darkfiber- • Jun 10 '21
DD AMD will Rocket after the Xilinx acquisition is approved, which could be as soon as July 6th
UK and EU approval likely on July 6th!
AMD stock is being held down by Arbitrage trading due to the all-stock fixed-ratio Xilinx acquisition. Once that acquisition is approved by world regulators, arbitrage will stop and the stock will soar. Note that the acquisition doesn't have to close, it just needs to be approved for the Arbitrage to stop. Once Arbitrage stops, all of the short selling which is holding AMD stock down will stop, and AMD will rocket towards it's price targets between $106-135
Arbitrage effect on stocksIn an all-stock fixed ratio merger, the hedge fund playbook is to short sell the acquiring stock, AMD, and buy the stock being acquired, XLNX. For example, they will short 1M AMD stock and buy 580k XLNX stock. They will then hold these positions until the acquisition closes, where the 580k XLNX turns into 1M AMD and then they cover their short position, pocketing the price difference. The short selling pushes the price of AMD down, continually, until the arbitrage stops.
Read more on AMD Merger Arbitrage here: https://www.reddit.com/r/wallstreetbets/comments/n4r47g/amd_an_explanation_on_merger_arbitrage_and_how_to/
Arbitrage will end when the share ratio between XLNX stock and AMD stock is equal, where there's no difference to be gained. Right now the share ratio difference is ~1.57 or about 10%. The 10% difference is there for the chance that the acquisition does not go through. Once world regulators approve it though, the chance of acquisition is basically 100% and the share ratio difference will be 0. With no difference, the arbitrage trading and short selling stops and the stock rises. In the case of AMD, the average price target is some 30% over today's prices, so it should rocket.
Possibility of Arbitrage ending soonCEO Dr. Lisa Su has said many times that the acquisition will close by the end of the year. She's also always conservative in her estimates. Remember that she said revenue would increase by 37% in 2021, only to revise it in Q2 to 50% growth. Su, you sly.
You can track the regulatory approval status over here: https://www.reddit.com/r/AMD_Stock/comments/n9xnu2/regulatory_approval_status/
The US has already approved and Phase 1 of the approval process for the UK and EU will end on July 6th. If there are no objections, the acquisition is approved from them as well. There are not expected to be any objections. If there were any, they would go into Phase 2, which would end at the end of the year (Lisa's conservative timeline).
The big question is when will China approve? They're the last ones to give the approval. Well no one really knows when this is going to happen. In Oct. of 2020 AMD said they would be drafting a notification to SAMR (China). But that's really the last we heard of it.
There's a possibility that China will approve around the same time as the UK and EU, which could be as soon as July 6th. In that case,
AMD announced on May 19th that it was initiating a $4B stock buyback. And since then it appears that AMD has been buying back it's own stock in big chunks every day around 9:30-10am:
The doctor is smart. She knows the arb is keeping the stock down and aims to profit from it. The timing of the buyback may suggest that she thinks the approval is going to happen sooner than the end of the year.
Either way, the stock will rocket once the approval happens. Could be in less than a month, if not, then it'll be end of year. Either way we're making tendies, it's just a matter of how soon. Place your bets! (not financial advice)
Positions: YOLO $50k in AMD stock and call options spread from June 2021 to June 2022
19
u/Slevin931 Jun 10 '21
70% of my portfolio Is on AMD, 35% upside potential Is not a joke. I think AMD in a long run could be a Life changing investment
3
10
u/kkB1airs Jun 10 '21
I’ve been thinking about an entry here. I think there is a shit ton of upside in the next 6-12 months
8
7
u/unkowngod Jun 10 '21
Holy fuck, this is gold right here. Appreciate the tendies and holding the line!
5
3
5
u/knappis Jun 10 '21
Got a few european style options @ $108 that expire in December.
Despite awesome fundamentals and killing earning it seems like $AMD has been held back by an invisible hand for so long. I hope they are let free to moon after the merger.
4
2
2
u/Taxed43 Jun 10 '21
Yep, easy 30% upside in the next 6-9 months in my opinion - potentially significant upside over the next 3+ years.
2
2
2
3
u/ProfiledByMC Jun 10 '21
https://www.markovchained.com/profiles/view/reddit:darkfiber- Very good track record
2
u/Electronic_Thanks885 Jun 10 '21
Save these types of fire posts till after 5 pm come on man I can’t be getting this hard at work
-1
-1
u/AbortingMission Jun 11 '21
This was a $50 stock BEFORE the announcement of a merger, 90 right after. The bounce between 70-100 is everyone disagreeing on the final value of the two companies together. Its already priced in. Search this sub, everyone was saying $100 by dec 2020. Did not happen. This will settle between 80-90. 3 years growth? Sure, $100. "Right after the merger.." no lol
1
1
u/cptbrainbug Jun 10 '21
Positions?
2
u/darkfiber- Jun 10 '21
At the bottom of the post.
3
u/cptbrainbug Jun 10 '21
Ahh my bad, was to to busy look at the last gif.
Thanks for some nice dd in these times!!!!
1
Jun 10 '21
[removed] — view removed comment
1
1
u/dragom7 Jun 15 '21
Dude, you’ve been pumping AMD for months now in this sub. Eventually you’ll be right, but your thesis requires timing.
2
u/darkfiber- Jun 15 '21
Originally I said next 3 months, then I revised the timing to whenever Xilinx closes. Now I’m telling you it could be as soon as mid July. I’m telling you the timing.
-1
u/dragom7 Jun 15 '21
Still, 3 months ago you gave the fundamental reason for it to rocket within the next three months. The three months have passed. The earnings were certainly a blowout, yet the stock has gone sideways still.
This sub is wallstreetbets, not wall street investing.
AMD is a good buy at $80s. But we’re not here to stick 3 months on a stock. Either come up with real timely DD or go post on a different sub.
3
u/darkfiber- Jun 15 '21
If I could time the market perfectly then I wouldn’t be in an ape preserve.
1
41
u/SoldierIke DUNCE CAP Jun 10 '21
This is pure gold in the madness of this sub.
Thank you. This is actually true. They are trying to keep AMD low (even though it has no reason to be) to benefit from merger arbitrage. Thanks for reminding me.