Shares - To buy or not to buy?

[jurbie]

My employer has today announced that the company is working towards a merger with a rival company. In response to this another rival has announced they might be interested in a similar deal. A check of the share price has seen it increase by about a third so not being a shares kind of guy I was wondering if this is worth a punt of a couple of grand?

Clearly I've missed the boat with the initial increase but is it worth a punt on the prospect that there may be 2 big companies competing to merge with us? As I see it the only risk is that one or both deals fall through and todays gains are wiped out. (I don't know how much the price went up when the first deal was announced, I only checked when the second announcement was made.)

I know there is no real answer to this but would be interested in seeing what others might do in such a situation.

[Hyper10]

I assume it's May Gurney/Kier etc. It's a tough call but hard to see a serious bidding war breaking out but DYOR and just my opinion

[Mankers]

Impossible to say what will happen to the share price, it would appear to be nothing more than a speculative punt as the possibility of a merger is in the public forum and to some degree or another will be priced in.

If you are really convinced open a CFD account take a 10:1 leveraged long position with your £2K and gain £20K exposure!

[padhinbed]

Its a strange situation to be honest. Look at what happened when Costain and Mouchell had their little discussions.

Depends really on who you where thinking of buying shares in, Costain/May Gurney or Kier.

Echo comment above about doing your own research but good luck with what you decide.

[RoadToNowhere]

Mankers said:

If you are really convinced open a CFD account take a 10:1 leveraged long position with your £2K and gain £20K exposure!

Never really understood CFD before... just had a read up... bloody scary of you don't know what you're doing...!

[Mankers]

RoadToNowhere said:

Mankers said:

If you are really convinced open a CFD account take a 10:1 leveraged long position with your £2K and gain £20K exposure!

Never really understood CFD before... just had a read up... bloody scary of you don't know what you're doing...!

Great if you do though and have access to plenty of quality research material and want to speculate on price movements. Not a good idea to wade in with half an idea.

Starting with just £1K, if you leverage 10:1 you will gain the rough equiv of holding £10k of the underlying, equity, index, FX, or whatever. If the underlying drops 10% you have will have lost your entire initial margin, conversely if the market gains 10% you will have doubled. Buying shares you would have gained or lost just 10% of your £1K. Either way obviously there are dealing costs to consider, stamp on the shares and interest on the CFD's, but you get the idea.

First trading day this year was a good opportunistic example, the markets opened up, the signs were strong that there would be a rally throughout the day, which there was (fiscal cliff resolution and good indicators out of the US). This turned into a longer rally throughout the next few weeks and months. Easy to get a good £50K exposure level from a £5K balance.

• It should be noted that unless you have a good level of experience with using derivatives for trading and leverage purposes you should tread with extreme caution!**

[sideways sid]

I'm not familiar with this specific deal but there is often money to be made using CFDs to buy the company being acquired and sell the acquiring company(ies)

[Mankers]

sideways sid said:

I'm not familiar with this specific deal but there is often money to be made using CFDs to buy the company being acquired and sell the acquiring company(ies)

Known as a 'Pair' trade. Take a long position on the equity you think will rise and a short on the other related equity. Also useful if a pair of equities are well correlated with each other and for some underlying reason they trade out of sync, there is often an opportunity to set up a pair trade as they converge back towards their 'normal' trading pattern.