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Profit From Focus Media Holding Going Private

ByChris Vermeulen
Published 09/07/2012, 03:36 AM
Updated 07/09/2023, 06:31 AM

A very reputable consortium led by The Carlyle Group (NYSE: CG) has made an offer to take Focus Media Holding (NASDAQ: FMCN) private at $27 a share. At present, Focus Group Media is trading around $24.26 a share. This is a chance to profit from arbitrage tactics.

Arbitrage is profiting from inefficiency in pricing. This can happen between two markets or two different asset classes. In the case with Focus Media Holding, it is the difference between what the Caryle Group and others are willing pay to take the group private and the price price.

At present, this is about a 10% spread. Due to the takeover offer, Focus Media is up 22.34% for the last month of market action. However, some have chosen to take profits and sell. As a result, Focus Media is down 2.14% for the last week of market action.

That is to be expected. Speculators will jump in after the announcement and cash out quickly. Conversely, long time shareholders will elect to sell now and book profits rather than wait for the remaining 10% of so. For traders and speculators, it is the opportunity to book a nice double digit profit in what appears to be a very solid deal as the Carlyle Group is involved.

For sector profits, traders and speculators should look for more Chinese companies to go private. Being publicly traded has not turned out to be as lucrative as many as hoped. Whenever there is another case of fraud at a Chinese company, all are tarnished; except for the blue chips like China Mobile and Petro-China.

Proper due diligence must obviously be exercised for his. As detailed in previous articles, no Chinese company found to be fraudulent has paid a dividend. Focus Media has a dividend yield of 2.24%
Carlyle Group

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