If I buy CFC share today will they transfer to BAC?

Question

Say I buy one share of CFC today. CFC share cost around $4.60 a share. When the CFC shares transfer to BAC which is currently $26 a share will I make about $20 on my stock? Is this how it works when there is a buyout? If not can you tell me what will happen to CFC.

http://biz.yahoo.com/rb/080625/countrywide.html?.v=8

Answer 1

There is a small advantage for the moment in buying CFC, in that you're essentially buying BAC at a discount.  The buyout agreement is that each CFC share gets 0.1822 shares of BAC.  At current prices, this gives you around an 8% discount (buying CFC at $4.28/share is roughly equivalent to buying BAC at $23.49/share, but BAC is currently priced at $25.47).  If you complete the deal, you lock in a 7.7% discount over buying BAC at the moment.  This of course assumes you want to buy BAC at this moment, which may or may not be the case.  I did this to convert 234 shares of BAC I owned to 1390 CFC shares, which will in turn convert back to 253 shares of BAC, netting me 19 shares for the brokerage cost of two trades (about $20 for me, or just over $1/share).  In the next few days I imagine this relationship will change, with the prices tending toward each other, and perhaps even CFC becoming more expensive than BAC (converted at 0.1822/share) if the short-sellers are squeezed in covering their positions.

Answer 2

It will but It is not a 1 for 1 trade. It is a small % of a BAC share you will get . That $4.60 figure approximates it pretty well. No reason to buy as will be out the broker fee.