It seems as if stock market reaction to Playtech’s acquisition of retail forex broker Plus500 is somewhat different for the two companies. Acquirer Playtech PLC (LON:PTEC) has seen its shares drop about 4% as of the time of writing to £8.00, while the acquired Plus500 Ltd (LON:PLUS) is trading up 3% to £3.80.
The most interesting observation, in our view, is that Plus500 shares – despite trading up today – remain well below the £4.00 offer made by Playtech. In similar situations we often see an acquired company’s shares trade above the offer price, as traders often speculate that a better bid might be out there, or that minority shareholders who need to approve the deal might hold out for a better price before giving their approval to the deal.
But that doesn’t appear to be happening here.
We believe that many Plus500 shareholders are taking the chance to recoup some of their losses from the past couple of weeks by selling now. Similarly, speculators who bought in recently as Plus500 dipped into the £2-3 range are taking the quick money now and getting out.
There’s also the possibility that Plus500 doesn’t resolve its issues with the FCA in a timely manner, as its UK client accounts remain frozen. That ‘drag’ also seems to be what is bringing down Playtech’s shares today, despite Playtech’s indication that the acquisition ‘is expected to be immediately earnings enhancing’.
Playtech’s cash in the bank (€692 million as at year end 2014) isn’t earning much interest, so nearly any Plus500 profit should indeed be additive to Playtech’s bottom line and earnings per share. But the risk that ‘something might go wrong here’ seems to be making skeptics of some Playtech shareholders.
Stay tuned to LeapRate as we continue to follow what is sure to be an interesting story.