"offer to buy" and live portfolio rebalance

My live portfolio just sold EMMS because of “(RULE:Corporate Action: Offer to Buy).” I don’t understand this. CEO Jeff Smulyan has offered to take Emmis private twice before, and nothing has come of it. Why should my portfolio sell the stock just because he’s made a third offer? I only have one sell rule, and that’s not part of it. Is there a way to modify my sell rules or restrictions so this doesn’t happen?

To make things worse, my live portfolio just bought FLL a week after its latest earnings announcement, which was terrible but which hasn’t been entered into the system yet. The port will surely turn around and sell it in a week or two, and with variable slippage, that’s going to cost me a lot. Is there a buy rule that can stop this from happening in the future? It’s complicated because the data for FLL says its next filing is n/a.

Thanks,

  • Yuval

Yuval,

On the last page of the Sim/Port (Period & Restrictions) set the parameter Allow Mergers to yes.

I’m assuming that “allow mergers” means that if the company gets bought by a different company my stock would be replaced by stock in the new company. I don’t want that. THAT would justify an automatic sale. Keeping a stock that has received an offer to buy is something entirely different, no? And shouldn’t the port respond not to offers, which are evanescent, but to actual purchases?

Allow Mergers set to yes means that if a merger is announced for a stock that you hold it will be kept and not sold. If a stock is in merger talks then it can still be bought.

If Allow Mergers is set to no, then if a potential merger is announced for an owned stock it will be sold, and stocks in merger talks won’t be bought.

I’m seeing at least three corporate action events in my logs;

Corporate Action: Merger
Corporate Action: Offer to Buy
Corporate Action: Merger Election

Maybe P123 could give us more resolution as to which events cause a closing transaction.

Walter

The features described in this thread may be able to help you with situations like FLL:
https://www.portfolio123.com/mvnforum/viewthread_thread,9790

Steve

FLL doesn’t have a stale statement now and has never had one in the past.

One could exclude companies whose LatestNewsDate was more than 90 days ago, but a lot of companies don’t release their earnings on a regular 90-day schedule.

Maybe there’s no way around this.

All of them. We are parsing a corporate actions file. That file only identifies merger activity. It makes no nevermind if nothing came of it in the past; there is M&A activity now, so it gets the flag.

The idea of the merger flag is that under normal circumstances we are identifying stocks that have attractive valuations through either fundamental or technical trends and data. In a merger situation that goes out the window.

It doesn’t matter if a stock’s fundamentals say $12 and a stock’s technicals say $12, because when Icahn offers $15 then it’s worth $15. (Well, $15 less an implied option.) That situation happens not infrequently with our kind of data parsing, and that’s why we created the flag.

But we can’t assess the likelihood of a merger transaction or differentiate between the above actions. One of the assumptions in our models is that we prefer cash: You sell spun-off shares that you receive, you elect to exercise offers to buy. It’s baked into the program and isn’t user configurable aside from turning off the merger flag. (And even then, you’re probably just delaying the inevitable when it comes to sell actions.)

Sorry, what I meant was can P123 provide a user control for which corporate action causes a sell to occur? In this case, there would be three selection boxes corresponding to the three corporate actions.

Walter