AMZN Triggers a 56% Overnight Surge. The Next One Could Be Yours!
Did you see the “Merger Monday” news yesterday?
Shares of movie theater chain AMC Entertainment (AMC) surged 56% higher when the market opened Monday morning. The move came as a news source reported that the company was in buyout negotiations with Amazon.com Inc. (AMZN).
While neither company was willing to comment on the rumor, the news was enough to hand investors a tremendous overnight gain. And some investors who bought more aggressive option contracts for shares of AMC walked away with much bigger triple-digit percentage gains!
This kind of near-instant profit is typical of what happens in the lucrative buyout market.
When a buyout deal is announced, the stock that is being acquired will typically surge once the news hits the wires. And investors with the good fortune to have a position ahead of time are rewarded richly!
These types of buyout transactions are going to be happening much more frequently in our post-coronavirus crisis world.
But how do you know which companies will be involved?
Let’s take a look at how these lucrative opportunities typically play out!
Anatomy of a Buyout Deal
A buyout deal is simply a transaction where one company purchases all of the shares of another company at once.
This type of deal is typically negotiated by board members in secret. And the buyout price is almost always well above the current stock price for the company being bought. This way, current shareholders will be likely to agree to the terms since they’re getting paid a big premium for their investment.
Once the deal is announced, shares of the company being bought out will typically surge toward whatever the buyout price is expected to be. That usually gives investors who already held shares of the target company a giant overnight gain.
Buyout negotiations must be kept a secret. Because if some investors knew that a deal was going to occur, they would have an unfair advantage. They could buy shares at the current market price, and then sell at a higher price once the deal was announced!
Any leak of a confidential buyout discussion could cause shares to jump higher even before a deal is announced.
This happens because investors are trying to get ahead of a rumored deal. And that’s exactly what happened with AMC over the weekend!
Confidential information was leaked to a news source, and when even the potential for a deal to occur was announced, shares of AMC surged 56% higher.
It’s a great example of just how powerful buyout transactions can be. And a reminder of why professional investors allocate tremendous resources toward finding out which companies will be the next buyout opportunity!
Open Season for Buyouts
Following the initial coronavirus crisis pullback, the environment for buyout transactions has become much more favorable.
You see, we’ve got a scenario where there is a big divergence between businesses that “have” and those that “have not.”
Amazon and AMC are two perfect examples of this.
Amazon is a company that has actually benefited from the crisis. The company is fielding more orders than ever before as consumers do as much online shopping as possible. And all of this cash flowing to Amazon gives the giant retail firm plenty of capital to work with!
We know that Amazon has aspirations to be a dominant player in the film industry through it’s “Prime Video” initiative.
Using its excess cash to buy out AMC could make perfect sense as AMZN could offer special movie perks to its installed base of Amazon Prime members, and could also cut major deals with Hollywood actors and content producers.
AMC’s 1,000 cinemas and 11,000 screens spread across 15 countries would certainly be a great resource for Amazon to grow its movie business!
If a deal were to materialize, Amazon would essentially be taking advantage of its financial strength during a time when many other companies (like AMC) were experiencing weakness.
Just last week, we talked about Apple Inc. (AAPL) borrowing $8.5 billion in a suspicious transaction. My hunch is that Apple is gearing up for its own round of buyout transactions.
In a world where some companies are sitting on mountains of cash, while other companies are struggling with the coronavirus shutdown, it is only natural to see the “haves” taking advantage of their position and buying out rivals to grow their own business.
Getting Your Share of the Buyout Profit Pie
As I mentioned, investors who can pick stocks most likely to be bought out can walk away with tremendous gains during this buyout season.
Why shouldn’t that be you?!
Of course, buyout negotiations are confidential and it would be illegal to invest based on non-public information.
But that doesn’t mean we can’t use tools and research to find the most likely buyout candidates!
When it comes to situations like Apple and Amazon gearing up for a season of buyouts, we can look for companies in the market that would fit well with these two consumer tech giants.
It’s not always hard to identify smaller companies like AMC which would be a good buyout fit!
Plus, there are some special research tools that can pick up on subtle hints hidden in the market that can identify which companies may already be in buyout negotiations.
Here at St Paul Research, we’ve invested in one specific tool that looks for unusual activity hidden in the options market that can tip us off to a future buyout deal.
You see, many times people who are involved in the buyout negotiation get greedy. And they place secret trades in the option markets to take advantage of the confidential information they have.
Our One Day Bonus Indicator was designed to sniff out these secret trades and alert us to potential buyout situations that are brewing.
This is a great tool to help our readers get ahead of big profit opportunities like buyout plays.
You’ll be hearing more about this indicator and the deals we’re watching as this buyout season picks up momentum.
After all, there’s a tremendous amount of profit opportunity here and I want to make sure you’re in a position to lock in your share of the buyout profit pie.
Here’s to growing and protecting your wealth!