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Riding GAN Limited's Buyout to a 25% Merger Arb Return
"Teach a man to arbitrage and you will feed him forever.” -Warren Buffett
Sean O'Reilly
August 01, 2024
In partnership with
Riding GAN Limited's Buyout to a 25% Merger Arb Return
“Give a man a fish and you will feed him for a day. Teach a man to arbitrage and you will feed him forever.” -Warren Buffett
For this inaugural issue of the newly revamped Bottom Line Investing I have a something special for BLI readers: The chance to make a 25% return in just 6 months.
But before we dive in, we should define what I mean by “arbitrage”.
Arbitrage is when you make money by buying something for less in one place and selling it for more in another. It's like exchanging your dollars for another currency at a better rate.
Another type of arbitrage, called “risk arbitrage” (because there’s a risk the deal won’t go through), involves trying to profit from an upcoming corporate merger.
Not all mergers and corporate takeovers are consummated. Weighing the risks, and knowing where to look for fruitful opportunities, is all part of the game.
Which brings us to the opportunity we’re highlighting today.
On November 8th, 2023 it was announced that GAN Limited (NASDAQ: GAN), a modest provider of software solutions to the internet gambling and sports betting industry, is set to be acquired by SEGA SAMMY HOLDINGS INC in an all cash-transaction at $1.97 per GAN share.
With GAN shares trading at around $1.57 per share as of the time of this post, investors stand to make a solid 25.4% return in just 6-9 months.
Terms of the Deal
Merger Terms: SEGA SAMMY will acquire all outstanding GAN shares at $1.97 per share in cash.
Regulatory Approvals: The merger has already received clearance from the Committee on Foreign Investment in the United States (CFIUS) and the Nevada Gaming Commission and awaits approval from various other gaming authorities.
Completion Timeline: Expected to close in late 2024 or early 2025 (Business Wire).
The Bottom Line: We Like the Stock
Currently, GAN's trading price is significantly lower than the $1.97 per share offered in the deal, presenting a lucrative arbitrage opportunity for investors. This is likely due to GAN’s micro-cap status at just $71 million and uncertain time-to-completion than any obvious risks.
While the completion of the merger hinges on obtaining approval from all relevant gaming authorities, we think the company’s relatively small size makes it relatively non-threatening to the online gambling industry at large.
As always, readers should conduct their own research before making any investment decisions.
Disclosure: This content is for educational purposes only and should not be construed as financial advice. Sean O'Reilly may have positions in some of the stocks discussed in this post. Please conduct your own research or consult a financial advisor before making any investment decisions.
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