Issuing shares in a merger is it DILUTIVE or ACCRETIVE, ??
Aug 31, 2016 17:29:33 GMT
stcks, miamianne67, and 11 more like this
Post by Deleted on Aug 31, 2016 17:29:33 GMT
If WE own a company, Let's CALL it Acme nuts, and the share count is ONE SHARE and we are losing $50 dollars and we buy another company, call it bolts, that is losing $50 and pay ONE SHARE the combined company is now losing $100 on TWO shares, but there is no dilution, each share is still losing $50. The good news is we can now sell NUTS and BOLTS if the creditors leave us alone.
What if there was a big market, and a profitable market for nuts, and we were earning $50 and then we buy the bolts company that is losing $50 so now we are breaking even on our two shares, the merger in this case IS dilutive. WAIT, isn't doubling the share count always dilutive, umm, some do toss that idea around a lot. The answer is NO.
What if NUTS was earning $50, and bolts was earning $50, and they merge, but because we can now sell nuts and bolts earnings explode to $200, on our 2 shares, was this merger accretive or dilutive??? YES, NO dilution, NONE!!! We doubled the share count, and there was NO DILUTION, the merger was ACCRETIVE, not dilutive, JUST LIKE OPKO & BRLI !!!
I get that OPKO issued more shares to buy BRLI, and because there were more shares that the shorts breathed a sigh of relief. I DO get tired of hearing about how the BRLI deal was DILUTIVE, when it was in fact ACCRETIVE. Granted a higher share count, but the shares are now profitable, ALL of them, every share, and OPKO can now SELL both NUTS and BOLTS.
Prior to the BRLI deal opko was losing 170 million dollars a year, and after the merger they are showing a profit of about 30 million this year, a 200 million SWING in OPKO's fortunes, in an EXTREMELY ACCRETIVE merger.
Share price will eventually follow REVENUE and EPS.
For a better explanation: www.ibankingfaq.com/category/interviewing-technical-questions/mergers-and-acquisitions/
What if there was a big market, and a profitable market for nuts, and we were earning $50 and then we buy the bolts company that is losing $50 so now we are breaking even on our two shares, the merger in this case IS dilutive. WAIT, isn't doubling the share count always dilutive, umm, some do toss that idea around a lot. The answer is NO.
What if NUTS was earning $50, and bolts was earning $50, and they merge, but because we can now sell nuts and bolts earnings explode to $200, on our 2 shares, was this merger accretive or dilutive??? YES, NO dilution, NONE!!! We doubled the share count, and there was NO DILUTION, the merger was ACCRETIVE, not dilutive, JUST LIKE OPKO & BRLI !!!
I get that OPKO issued more shares to buy BRLI, and because there were more shares that the shorts breathed a sigh of relief. I DO get tired of hearing about how the BRLI deal was DILUTIVE, when it was in fact ACCRETIVE. Granted a higher share count, but the shares are now profitable, ALL of them, every share, and OPKO can now SELL both NUTS and BOLTS.
Prior to the BRLI deal opko was losing 170 million dollars a year, and after the merger they are showing a profit of about 30 million this year, a 200 million SWING in OPKO's fortunes, in an EXTREMELY ACCRETIVE merger.
Share price will eventually follow REVENUE and EPS.
For a better explanation: www.ibankingfaq.com/category/interviewing-technical-questions/mergers-and-acquisitions/
