Hi - should Journal Communications (JRN) have been filtered out by “Allow Mergers = No” in a live port? It merged with EW Scripps today under the new ticker JMG but my port bought it earlier this week anyways. Looks like the date was set a couple weeks ago.
JRN ticker disappeared today.
Yep because the merger with some of EW Scripps assets created a new company trading under ticker JMG as of today. My question is - should setting “Allow Mergers” off have avoided JRN earlier this week? As the merger was known in advance?
there have been many threads written about this and it seems that there is no up to date, single database that talks to this that P123 can use. It just points out that one needs to due their due diligence before purchase as well as monitor after purchase. I am amazed, though, that the company that P123 uses on a weekly basis does not have a flag or data field for this somewhere. This is such a common and ongoing occurence.
This is from the press announcement:
Journal Communications’ class A and class B shareholders will receive 0.5176 Scripps class A common shares and 0.1950 shares in Journal Media Group for each Journal Communications share.
I just called my broker, Vanguard, and they confirmed that I would get two new tickers in exchange for JRN. They are not sure when.
it is strange that S&P did not flag this. Interactive Brokers did flag it a long while ago if you held them through them.
So , it’s a bit complex.
There’s an issue and it’s not April fools (…who chooses this “auspicious” day as the merger deadline ??)
We have the original merger annoucement dated 8/1/14, scheduled to complete on April 1st 15. However the “April 1st 2015” deadline is only found in the description of the corporate action and we do not process plain english text. The “close date” field, which we process, was, and still is, N/A (it might get filled soon which, btw, could cause backtests to change)
This merger took 8 months, and there were no interim corporate action “updates”. The stock is being recommended because we expire merger annoucements after four months if there are no updates (there are too many cases in the database where failed mergers are never “closed”). So I think we should change our automatic expiration to 9 months, or thereabouts, from four months. However this change will affect backtest results. We’ll test it out before we launch this.
Thanks
Got it - thanks Marco for the explanation. Wasn’t a huge issue for me in this case (the trade will be more or less value neutral minus the minimal IB fees and the alternative for this port was to have that portion in cash anyways) but helps to understand the complexity.
Marco, thanks for looking into this.
We will release a new version tonight that only expires a merger announcement after 9 months instead of 4 months. Today, 4/1/2015, it resulted in 91 companies in merger talks vs. 57. (just run a screen with the rule DaysFromMergerAnn>=0 and you get 57 companies)
The additional companies that were found are listed below. It seems a lot more accurate.
ALTV Alteva
AVIV Aviv REIT Inc
BHI Baker Hughes Inc
BKYF Bank of Kentucky Financial Corp
CMSB CMS Bancorp Inc
CNL Cleco Corp
DRC Dresser-Rand Group Inc
DUNRQ Dune Energy Inc
EPIQ EPIQ Systems Inc
FDO Family Dollar Stores Inc.
GFIG GFI Group Inc
GSIT GSI Technology Inc
HBNK Hampden Bancorp Inc
HRZL Horizon Lines Inc
HVB Hudson Valley Holding Corp
IGT International Game Technology
IRM Iron Mountain Inc
ISLT Islet Sciences Inc
JRN Journal Communications Inc.
LO Lorillard Inc
MWV MeadWestvaco Corp
QSR Restaurant Brands International Inc
RONED Princeton Capital Corp
SHOR ShoreTel Inc
SIAL Sigma-Aldrich Corp
STE STERIS Corp
SUSQ Susquehanna Bancshares Inc
TLP TransMontaigne Partners LP
TRW TRW Automotive Holdings Corp
TWC Time Warner Cable Inc
VIAS Viasystems Group Inc
VYFC Valley Financial Corp
WMGI Wright Medical Group Inc
XLS Exelis Inc
This is a more complete list.
yes, good example of how these things can drag out is that two tobacco industry companies, LO and RAI, announced a merger back in July. Nothing yet. FTC still looking at it. I own them both anyway as defensive stocks.
It does look like the new rule caught more companies. Good. It is interesting that LO was caught but not RAI, the company it is merging with.
Besides the fact that we don’t have the data for acquisitions…
I don’t think it should catch RAI. The whole point of excluding companies being acquired is because the price action has nothing to do with what P123 can analyze (fundamentals, estimates, etc). RAI is the acquirer. It’s price action is still reasonably tied to it’s fundamentals.
The problems with RAI will be after the first filing following the merger. The results will reflect both companies, but very little will have been re-stated. Most likely only a couple of annual reports. So any TTM ratios, growth rates, etc, will probably be completely wrong. The only doable fix we foresee for this problem is a way to exclude companies that have made a recent acquisition, like a new factor “DaysAfterAcquisition” . But we’ll need extra data for this to happen, which we plan to get.
Thank you Marco for the change.
Thanks for looking into this Marco and commenting. What you say makes sense. The more I look at this, being acquired had a very positive effect, I believe, on JRN’s price. So excluding them, as an acquiree, would make me miss this opportunity. JRN had growing fundamentals (which is why I initially selected it) but the ‘kicker’ was the acquistion/merger with Scripps. I re-simulated all my ports and they either improved or stayed the same. So no downside. I think I will include potential mergers candidates in my ports now and not exclude them. This whole exercise made me think about this. But I am going to start monitoring them by running a separate screen using the one rule DaysAfterAcquisition.
Hi Marco,
Any chance the explanation you gave here would also explain the couple of merger issues reported here → https://www.portfolio123.com/mvnforum/viewthread_thread,8529 ?
In particular the point about backtests changing when the “close date” field is finally updated…
Thx
Jerome