I own Starnent Stock which is selling for about $34 per share. Cisco has agreed to but it in Jan for $35 a share. Should I hold onto it or sell it if it gets to $35 per share. I am confused & Etrade says they can't give me any info. Help, please.
When you're in an arbitrage situation like this, the proper way to analyze it is to ask yourself two questions:
1) What are the risks that this acquisition doesn't close?
2) Can my money get better returns elsewhere?
There is almost always some risk, however small, that the acquisition doesn't close. It may come in the form of regulatory hurdles, or it may happen because one company's chairman spills coffee on the other chairman's lap and they develop a grudge. You'll have to dig into the chances of that happening; the street has its view which is reflected by the gap between current and acquisition price, but you should do your own analysis too. In evaluating what would happen should the deal completely collapse, I usually start off by assuming that the price for the target company's share price will return to roughly where it should be had there never been an offer from the other company (maybe dip a little bit lower in the short run).
When you get all that figured out, you need to compare the time-weighted return with the return that you could get elsewhere, and weigh the risks of each. Start off with "risk free" options of treasuries or even a CD for the time period and see how your return compares. Is it worth the risk? Then price it against other measuring sticks... S&P ETF (usually quoted as 8-10%), Walmart bonds (4% area i believe?), etc. Get a feel for what your money can do elsewhere.
Finally, when you got that all figured out, you can make an informed decision.
That depends on what you paid. If you paid $20 from the last dip or even around that (under $30), you should cash it in where it's at, or at least put a stop in for half of the shares. Anything can happen and deals fall through sometimes, especially with that much of a time span. If you paid $33 and up, hard to say, might be slightly nervous.