Low Risk Arb Plays

I’ve started to get back in some low risk arb plays. I was recently in Cypress Semiconductors, which just closed today. Cypress Semiconductors received all regulatory approvals and there was still ~ 5% annualized return spread. Today, I picked up some Mellanox Technologies (Ticker: MLNX), which also received all regulatory approvals and is anticipated to close by April 27^th. Again, with Mellanox Technologies you are looking at a ~7% annualized return with virtually no risk. These deals will close unless a giant asteroid come crashing down to earth and destroys everything. I like these near term deals as they provide attractive returns with the cash I have on the sidelines. Much better than the ~ 0.40% yield I’m currently receiving in my money market account.

March 2020 Performance

In this environment, just have to ensure safety and good health. This is much worse than the 2007 – 2008 financial crisis. Back then I remember people were still going about doing there normal routines. In this COVID-19 scenario, everything has ground to a complete stop. There’s no play book for this… Just have to ensure your portfolio doesn’t blow up and be still in the game with the market eventually recovers.

I’m not adding aggressively to anything. It’s a landmine out there. I nibbled on some Visa (Ticker: V) and Mastercard (Ticker: MA). Also playing some merger arb stuff such as Forty Seven (Ticker: FTSV) (short Puts) and Jumei International Holding (Ticker: JMEI) (long common). Forty Seven and Jumei International Holding are scheduled to close next week. Lots of really good spreads in the merger arb space, but of course there will be some blowups. Definitely staying away from PE buyouts as they have a history of walking from deals when the market gets shaky.

Stay Safe!

2020 YTD Performance = -13.8% with the running monthly returns as follows:

January +2.7%
February -6.8%
March -9.9%

Jumei International Holding

I took a small stab at Jumei International Holding (Ticker: JMEI) (~ 2% position @ $19.50). This is one of those going private China plays for a takeout price of $19.95 ($20 minus $0.05 ADS depository fee). The tender has been extended to April 8^th. From what I can gather, they have sufficient votes already tendered and financing is in place to meet the conditions for closing. For some reason, even though the tender expires on April 8^th, my broker’s tender deadline is today. The odds look good for a closing next week, so we’ll see…