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points by peter422 12 hours ago | 0 comments
The deal is for $65/share but Instacart is trading at $57. Why? Shouldn’t it be a lot closer to 65?
[–] tristanj 12 hours ago
1) There is a chance the deal is blocked by antitrust regulators, and does not close.

2) Regulatory reviews typically take 6 months to a year. There is an opportunity cost to holding shares over this time, your capital is tied up in shares, when you could instead use the money to buy US 10-year Treasuries that yield around 5%.

Assuming the deal closes at $65 in 12 months, the present value of these shares is $65 / (1 + 5%) = $61.90

[–] pianoben 12 hours ago
I think the discount is the risk of the deal not closing; there will be regulatory approvals, financing, all sorts of offramps ahead.

Also, the market has consistently undervalued Instacart since they went public to begin with, so why stop now? (signed, a not-at-all-bitter former employee)

[–] jagraff 12 hours ago
I don't know why for this specific deal but this could happen if the market expects that the deal won't close, for example if regulators blocked it
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