IRBT - Down 94% From Its All-Time High Here Are 2 Things iRobot Needs to Do for Shares to Soar
2024-05-24 05:18:00 ET
Warren Buffett is one of the greatest investors of all time but he's not stingy with his knowledge. On the contrary, he wants to be remembered as a teacher. And in 1988, he used his annual letter to shareholders of Berkshire Hathaway to educate investors on something called merger arbitrage .
In short, merger arbitrage happens when a stock trades at a price that is lower than what another company has already agreed to pay in a takeover. The first question that Buffett says investors need to answer in this situation is, "How likely is it that the promised event will indeed occur?"
When shares of autonomous vacuum cleaner company iRobot (NASDAQ: IRBT) traded below $50 in early 2023, I believed that Amazon 's takeover offer of $61 per share was a sure thing. After all, a $1.7 billion acquisition is nothing for a company of Amazon's size. I couldn't imagine any reasonable argument to block it. So, I made iRobot one of the largest positions in my portfolio, expecting a nice return when the deal went through.
For further details see:
Down 94% From Its All-Time High, Here Are 2 Things iRobot Needs to Do for Shares to Soar