$XLNX - Way to acquire AMD stock at 25% discount!

TLDR: If you like free money - buy XLNX and wait. For context, AMD announced Xilinx acquisition in october last year: https://www.amd.com/en/press-releases/2020-10-27-amd-to-acquire-xilinx-creating-the-industry-s-high-performance-computing The acquisition is an all-stock deal, which means for every Xilinx stock you will get exactly 1.7234 of AMD stock after the merger is completed. The merger is planned to be completed by the end of the year, and it has been reiterated during 2 of the previous earning calls. ​ What is there to gain? AMD stock is trading today at $112. Xilinx today is trading at $146. This means a ratio of 1.30 instead of 1.7234. Buying Xilinx you are buying AMD stocks for $85 after merger happens. This is 30% upside of free monies. ​ What is there to lose? If AMD/XILINX deal doesn't go through, XLNX will most likely jump straight back to pre-merger announcement territory, it will probably end up around $110-$115. ​ What could stop the merger from happening? There are several regulators that have to approve merger. Most of the important ones already did: https://www.reddit.com/r/AMD_Stock/comments/n9xnu2/regulatory_approval_status However it hasn't been approved by China yet: https://www.enterpriseai.news/2021/07/01/with-approvals-in-from-the-ec-and-the-uk-amds-35b-acquisition-of-xilinx-now-up-to-china/ The moment China approves the deal, Xilinx stock will jump very close to 1.7234 multiple of AMD (and possibly drag AMD down a bit, however merger approval is good news for AMD as well). ​ What are the chances China does not approve of the deal? Of course it's a gamble with high US-China tensions, but let's take a look at some facts. In 2019 Chinese antitrust committee reviewed 465 deals. It approved all of them (!!). https://www.lexology.com/library/detail.aspx?g=1421064d-d8f4-4591-963c-d0d65999ff57 In 2020 they reviewed 458 deals. Out of all of them, they rejected a single one (DouYu merger with Huya, both Chinese companies). https://www.gibsondunn.com/antitrust-in-china-2020-year-in-review/ This means only one rejection out of 923 deals! Nvidia purchased Mellanox in 2020 and it was conditionally approved through China. This is equivalent of AMD/XLNX deal. AMD owns ATI, which was started by Chinese Canadians. Both Xilinx and AMD are US based. They already have heavy business connections with China. I'm not bold enough to estimate the odds, but the facts suggest they're quite high! ​ If this is such a good deal, why is nobody else buying XLNX? They were, but had to cover their shorts! The most common way to play XLNX/AMD merger is to go short AMD and long XLNX, and that's what most investors did. However, with recent magnificient AMD run up after Q2 earnings call they were forced to cover their short positions as they became too expensive to hold till the merger. And I have proof that prices were closely correlated until very recently, let's take a look at this XLNX/AMD ratio graph: https://public.tableau.com/app/profile/upndown/viz/XilinxAMDSharePriceRatio_16114624177710/XilinxAMDSharePriceRatio Up until very recently the deal was oscilating within 1.5-1.6 area and after recent AMD run up it's been lagging strongly behind. Unless there's some hidden factor major investors know about but not common folks, this is literally the best time in history to buy XLNX to convert into AMD after the merger. ​ Positions: XLNX leaps, XLNX stock, AMD stock

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rotflolmaomgeez

Aug 4, 2021

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Change % Since Posting

146.46

Price When Posted

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XLNX

Xilinx, Inc.

153.78

-3.48
-2.21%
Current Price

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$XLNX - Way to acquire AMD stock at 25% discount!

bullish

TLDR: If you like free money - buy XLNX and wait.

For context, AMD announced Xilinx acquisition in october last year: https://www.amd.com/en/press-releases/2020-10-27-amd-to-acquire-xilinx-creating-the-industry-s-high-performance-computing

The acquisition is an all-stock deal, which means for every Xilinx stock you will get exactly 1.7234 of AMD stock after the merger is completed. The merger is planned to be completed by the end of the year, and it has been reiterated during 2 of the previous earning calls.

What is there to gain?

AMD stock is trading today at $112. Xilinx today is trading at $146. This means a ratio of 1.30 instead of 1.7234. Buying Xilinx you are buying AMD stocks for $85 after merger happens. This is 30% upside of free monies.

What is there to lose?

If AMD/XILINX deal doesn't go through, XLNX will most likely jump straight back to pre-merger announcement territory, it will probably end up around $110-$115.

What could stop the merger from happening?

There are several regulators that have to approve merger. Most of the important ones already did:

https://www.reddit.com/r/AMD_Stock/comments/n9xnu2/regulatory_approval_status

However it hasn't been approved by China yet: https://www.enterpriseai.news/2021/07/01/with-approvals-in-from-the-ec-and-the-uk-amds-35b-acquisition-of-xilinx-now-up-to-china/

The moment China approves the deal, Xilinx stock will jump very close to 1.7234 multiple of AMD (and possibly drag AMD down a bit, however merger approval is good news for AMD as well).

What are the chances China does not approve of the deal?

Of course it's a gamble with high US-China tensions, but let's take a look at some facts. In 2019 Chinese antitrust committee reviewed 465 deals. It approved all of them (!!).

https://www.lexology.com/library/detail.aspx?g=1421064d-d8f4-4591-963c-d0d65999ff57

In 2020 they reviewed 458 deals. Out of all of them, they rejected a single one (DouYu merger with Huya, both Chinese companies).

https://www.gibsondunn.com/antitrust-in-china-2020-year-in-review/

This means only one rejection out of 923 deals!

Nvidia purchased Mellanox in 2020 and it was conditionally approved through China. This is equivalent of AMD/XLNX deal. AMD owns ATI, which was started by Chinese Canadians. Both Xilinx and AMD are US based. They already have heavy business connections with China. I'm not bold enough to estimate the odds, but the facts suggest they're quite high!

If this is such a good deal, why is nobody else buying XLNX?

They were, but had to cover their shorts! The most common way to play XLNX/AMD merger is to go short AMD and long XLNX, and that's what most investors did. However, with recent magnificient AMD run up after Q2 earnings call they were forced to cover their short positions as they became too expensive to hold till the merger. And I have proof that prices were closely correlated until very recently, let's take a look at this XLNX/AMD ratio graph: https://public.tableau.com/app/profile/upndown/viz/XilinxAMDSharePriceRatio_16114624177710/XilinxAMDSharePriceRatio

Up until very recently the deal was oscilating within 1.5-1.6 area and after recent AMD run up it's been lagging strongly behind. Unless there's some hidden factor major investors know about but not common folks, this is literally the best time in history to buy XLNX to convert into AMD after the merger.

Positions: XLNX leaps, XLNX stock, AMD stock

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6-12 Months

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