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Fascinating New Merger Arb Special Opportunity



July 30, 2010 – Comments (0) | RELATED TICKERS: ALOY.DL


Several minutes ago, unfortunately after the market close, I gave the thumbs up to a company called Alloy, Inc. (ALOY) in CAPS.

Here's what I had to say about it:

Recently agreed to be bought out by ZelnickMedia for $9.80/share in cash. As a straight Merger Arb play, that represents a 3.26% gain from this level in what I expect to be a fairly flat market...not bad.

However, there might be something more than that going on here. Whitney Tilson and Glenn Tongue's hedge fund T2 Partners recently filed an activist 13D after acquiring 669,946 shares of the company, 5.2%, mostly in the $9.50/share range.

It's possible that T2 is just playing the merger arb game here, but there might be more than that going on. It sounds as though many of Alloy's shareholders feel as though the buyout offer that management accepted is way too low. Several law firms, including Goldfarb Branham and Faruqi & Faruqi, have even filed suit against Alloy on behalf of shareholders in an attempt to block the deal.

I have a feeling that there's more upside left in this one, but I'm going to have to do some more investigating first.  I wouldn't be surprised in the least if this one received at least a blurb in Barron's this weekend...which of course would destroy my long call because it would shoot up in pre-market trading to a likely unreasonable level.  I'm going to play this one by ear.  If the stock opens at around the $9.50 level on money I'm in.  If it is significantly higher than that, I'm gonig to seriously consider canceling my CAPS order.

No time for that's almost Happy Hour on a Friday. Is anyone out there familiar with this situation?

For more information on the filing, check out the following post on the always awesome Market Folly sight:  Hedge Fund T2 Partners Acquires Alloy (ALOY) Position.



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