Very cool insights. Thanks a lot.
I increased my position by 20% today at a price of EUR 24.70, given that I believe that the odds for a favorable offer - higher than the current price - are high. (80%+)
In addition, I believe that the upside is significantly higher (up to +30%) than the downside (likely not less than -15%)
I also agree with Aron that it is basically certain that there will be an agreement, given that Vonovia already set up the JV and sold 10% of its stake in preparation. I also believe that it is unlikely that the offer is too low because it is in Vonovias interest to resolve the matter in order to improve it’s financing situation. (I think Rolf Buchs recent comments could have been made to increase Vonovias negotiation position)
Considering that the conclusion of the agreement will already be voted on in December an announcement of the conditions could be imminent or could happen within the next month.
This would lead to a very good annualized return of investment if the share exchange price is indeed favorable compared to the current price.
My main arguments why I believe that the price should be higher are
- Dt. Wohnens NAV per share is slightly higher than that of Vonovias
- Dt. Wohnens adj. EBT per share is almost on par with Vonovias
- Terms of the Apollo JV sale are favorable both on a shareprice and compensation level. (The share price is at least a bit higher than current prices, and I think that investors in the JV might have gotten a discounted share price compared to what Vonovia will offer minority shareholders.)
Especially the first two arguments should weigh heavily as they are undeniable truths and need to be considered and prioritized by law.
Why didn’t I increase the position more?
After the price increase in Dt. Wohnen stock and todays increase of 20%, my holding is already almost on par with my second largest investment, Volkswagen and therefore larger than 10% of my portfolio.
Additionally, I don’t have extensive experience with those kinds of situations, as can be seen by our research. While I believe a positive offer is likely, I could be wrong. There is also always the possibility that we did not consider important aspects or made mistakes in our calculations. (therefore it is always great if everyone checks and challenges our research to help improve it) Some of our assumptions might also be wrong. For example, Vonovia could make a low first “negotiation offer” even if it knows that this will likely be challenged in court.
Lastly the stock exchange offer is only as good as Vonovias stock price. While the period until the terms of an agreement will be announced should not be large there is a risk that Vonovias stock could fall in this period and this risk will be persistent in case Vonovias offer will not be good and need to be challenged in court.
As always, I will keep evaluating the position and might change it in the future.