Author Topic: RSYS - Radisys  (Read 6344 times)

Gregmal

  • Hero Member
  • *****
  • Posts: 1107
RSYS - Radisys
« on: July 02, 2018, 10:45:06 AM »
Deal announced today 1.72 per share, closing is Q4. Current price 1.49 which represents over 30% IRR. Anyone else looking at this? Don't see many threats to this closing.
« Last Edit: July 02, 2018, 04:12:25 PM by Parsad »


writser

  • Hero Member
  • *****
  • Posts: 1636
Re: Radisys
« Reply #1 on: July 02, 2018, 12:12:42 PM »
I bought a few shares today.  Spread seems ridiculously high but I have never looked at this name before and am worried other market participants are better informed. Maybe CFI approval might be problematic given that they make software for 4G / 5G networks? I'd say unlikely for such a small company but what do I know. The buyer might be a bit controversial. Also, I only see a termination fee payable by Radisys (no fee if Reliance cancels the deal?). Some potential problems.. Still, 17% is a lot - and it traded even lower.

Maybe some more knowledgeable people can share their insights.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

cameronfen

  • Full Member
  • ***
  • Posts: 235

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 543
Re: Radisys
« Reply #3 on: July 02, 2018, 12:33:15 PM »
The wide spread does seem a little puzzling.

Anything cross-border runs the risk of drawing the ire of the Committee on Foreign Investment, but it's not obvious to me how the national interest would be served by blocking the sale of a tiny (slowly failing?) telecommunications services company. Prior to the deal announcement, they were in danger of being delisted from the NASDAQ, so the market certainly didn't have a high opinion of any patents or proprietary technology they happen to own.

Gregmal

  • Hero Member
  • *****
  • Posts: 1107
Re: Radisys
« Reply #4 on: July 02, 2018, 12:37:35 PM »
My thoughts are that this has been a perpetual over promise under deliver type of company and management, that briefly showed a tremendous amount of promise only to again implode. This was about a year ago and you've got plenty of shareholders underwater and likely throwing in the towel which IMO is probably the main reason for the excessive spread. Well, that and I would guess some concern that this is just some stunt and won't close, but that would be fraud...

writser

  • Hero Member
  • *****
  • Posts: 1636
Re: Radisys
« Reply #5 on: July 02, 2018, 01:33:37 PM »
you've got plenty of shareholders underwater and likely throwing in the towel which IMO is probably the main reason for the excessive spread.

I hope this is true and it probably explains at least some of the action today. On the other hand, I think such an explanation is potentially a bit simplistic / lazy. ~25% of shares outstanding traded hands today and another 25% is in the hands of a few large holders whom I assume didn't all sell (Renaissance, Blackrock, D3). Shares traded today at an average discount of ~15% for a deal that is supposed to close in a few months. Surely these shares weren't all owned by frustrated dentists who decided to sell them during lunch break. Also, the dollar volume was relatively low - if this was really such a no-brainer trade I'd expect that 'smart money' would snap up today's volume at far higher prices.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

Gregmal

  • Hero Member
  • *****
  • Posts: 1107
Re: Radisys
« Reply #6 on: July 02, 2018, 01:57:51 PM »
you've got plenty of shareholders underwater and likely throwing in the towel which IMO is probably the main reason for the excessive spread.

I hope this is true and it probably explains at least some of the action today. On the other hand, I think such an explanation is potentially a bit simplistic / lazy. ~25% of shares outstanding traded hands today and another 25% is in the hands of a few large holders whom I assume didn't all sell (Renaissance, Blackrock, D3). Shares traded today at an average discount of ~15% for a deal that is supposed to close in a few months. Surely these shares weren't all owned by frustrated dentists who decided to sell them during lunch break. Also, the dollar volume was relatively low - if this was really such a no-brainer trade I'd expect that 'smart money' would snap up today's volume at far higher prices.

Just playing devil's advocate but a third rate nanocap stock like this also likely isnt on the radar of much "smart money", period. Add in the reputational issues and utter disaster the past year has been, and I think I can at least get comfortable with rationalizing the discount. I'd also add that many deals since Trump took over have traded with out-sized spreads. This isn't uncommon and all these things put together, kind of warrant it. I'd have expected something closer to a 10-15% annualized discount though. Then again I'd never have expected the types of spreads we saw with Cabela's, BRCD, etc, either.

writser

  • Hero Member
  • *****
  • Posts: 1636
Re: Radisys
« Reply #7 on: July 02, 2018, 02:00:35 PM »
True, I think I owned both of them at some point. However I'm always a bit suspicious with such deals, hard to be sure you have an edge on the field. Same here. Keeping my position small and wouldn't mind selling opportunistically.
When you are dead, you do not know you are dead. It's only painful and difficult for others. The same applies when you are stupid.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 543
Re: RSYS - Radisys
« Reply #8 on: July 02, 2018, 06:10:50 PM »
Plenty of smart thoughts in this thread already.

There are lots of "known unknowns" and "unknown unknowns" in merger arbitrage situations like this. It's difficult to distinguish between "the market knows something that I don't" and "the market has this one wrong."

I just try to think probabilistically, be opportunistic, and size positions appropriately. Probably no one posting in this thread has an information advantage in this name, so any "edge" will have to be behavioral.

Foreign Tuffett

  • Hero Member
  • *****
  • Posts: 543
Re: RSYS - Radisys
« Reply #9 on: July 20, 2018, 09:49:35 AM »
Stock has bounced around, but @ $1.52 the spread hasn't closed much -- which is surprising, or at least it is to me.