Merger/Acquisition on short and long symbols
I have a general understanding of how mergers and acquisitions work for symbols being traded in long positions. However, I am confused about how these events are calculated when shorts positions are involved.
Let's say symbol ABC is merging with XYZ. Merger ratio is 1:2 (1 of ABC for 2 of XYZ)
If I am long 10 ABC and long 20 XYZ, after the merger I would be long 20 on ABC.
What happens if I am...
short on ABC and long on XYZ?
long on ABC and short on XYZ?
short on ABC and short on XYZ?
flat on ABC and short on XYZ?
(1)1 Comments
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This is a basic algebra problem. The terms of the merger are:
(1) ABC = 2 * XYZ
Your first scenario was that you are:
(2) long 10 ABC and long 20 XYZ
You did the substitution of (1) in (2) and came up with the answer of:
(3) Long 20 of ABC
So why are you asking us to do this for four more scenarios?
As they say, do the math!
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