Define target run-up? What are some possible reasons for run-up?

Solutions

Expert Solution

Target Run Ups imply a sudden and dramatic increase in stock price and trading volume of the target firm in the event of merger & acquisition. Stock price of Target usually goes up because acquring company pays a premium on stock price of the target. Broadly, following are the reasons for Target Run ups-

1- Market Anticipation- In an efficient market, sophisticated investors can identify potential M&A targets. The stock prices of potential targets may witness a target run up due to acquisition speculation. Price levels and strategic considerations of companies also might indicate a possible merger and acquisition resulting in a run up. Stockes being traded at low prices or financial distress are also indicators of a possible acquisition and may catch attention of the investors.

2- Toehold acquisition- Pre announcement run ups are often result of toehold acquisition. A toehold acquisition means acquiring less than 5% of target company's stock with an intention of takeover bid. This, along with market anticipation, may lead to run ups before M&A announcement.

3- Unreported Insider Trading-Reported insider trading, due to statutory filing requirements do not contribute much to trading around M&A and therefore don't contribute to run ups. However, unreported insider trading through non corporate insiders by way of information leak or tip offs, do contribute to run ups as well as market anticiation which again contributed to run ups.

jeff jeffy answered 1 year ago

Next > < Previous

Related Solutions

Define ethnocentrism and discuss the reasons for its existence. What are some of the consequences of...

Define ethnocentrism and discuss the reasons for its existence. What are some of the consequences of ethnocentrism, both negative and positive (there are some)? Using an example of a behavior that is accepted in another culture but would be questioned in American society, describe how you could use cultural relativism and come to understand this different behavior. Then, switch sides and apply cultural relativism. Using the same example, how would you react to this same behavior? (Examples: burial practices, marriage...

What are the possible reasons for Malnutrition for pediatric?

Discuss the assumptions, predictions, and performance of the “catch-up” model. What are some reasons that countries...

Discuss the assumptions, predictions, and performance of the “catch-up” model. What are some reasons that countries might have failed to “catch-up” over time? What, if anything, should those countries do differently in the future? Research an article that illustrates a country pursuing a policy which has hampered their economic growth in the past. Share a link to the article and include a brief description of the situation it describes, along with how you think they could improve things moving forward.

Select a product or service and as thoroughly as possible define its target market (be sure...

Select a product or service and as thoroughly as possible define its target market (be sure to include demographics, geographics & psychographics). What indicators cause you to believe this is the target market?

Select a product or service and as thoroughly as possible define its target market (be sure...

Select a product or service and as thoroughly as possible define its target market (be sure to include demographics, sociographic, behavioral, geographics & psychographics). What indicators cause you to believe this is the target market? *Please use different answer form the chegg since my friend already use the answer and no photos because I want to copy and paste it. Thankyou.

how would you define Fascism, and what were some of the key reasons that so many...

how would you define Fascism, and what were some of the key reasons that so many people living in Europe (particularly in Italy and Germany) in the 1930's and 40's chose to embrace it?

What are some possible reasons for two-sample t-test to have no statistical difference between the two...

What are some possible reasons for two-sample t-test to have no statistical difference between the two groups. The hypothesis of the test is determine to find if the two-sample test is larger than a certain amount. Please provide some reasons.

what are some possible reasons why marketing plans are not followed. State why you think so.

Which of the below are possible reasons for why some IPOs are underpriced [i.e., the price...

Which of the below are possible reasons for why some IPOs are underpriced [i.e., the price rises a lot on the first day]? It is necessary to compensate investors for risks of buying the security, including both “market timing” by firms and the “winner’s curse” To minimize the underwriter fees paid by the issuer and maximize the amount of capital the firm is able to raise Because of a conflict of interest between underwriters and the issuer Only (a) and...

Define the types of celibacy and discuss some of the reasons a person might become celibate....

Define the types of celibacy and discuss some of the reasons a person might become celibate. How have women’s reasons for celibacy changed over time? Discuss erotic dreams and fantasy. Define masturbation and discuss the following with regard to it: a. of the range of attitudes towards masturbation b. reasons why people masturbate c. research regarding ethnic differences in frequency of masturbation d. various self-pleasuring techniques Explain the importance of context in sexual expression and the Maltz hierarchy of sexual...

Subjects