The biggest M&A deal this week is definitely the USD 2.4 billion all-cash offer from Coca Cola (KO US) to buy Huiyuan Juice (1886) on September 3 2008. The offered price is triple of Huiyuan Juice’s share price before the announcement. It seems like Coca Cola really wants the company badly; otherwise they would not buy a company at such a premium in the current bear market.
One amazing side story stemming from this acquisition is the big jump in the prices of Huiyuan Juice warrants. The warrants jumped from 2.7x times to 192 times in one single day! The most spectacular rise — 192 times in one day — comes from a HSBC warrant (1337). If I only had invested $1000 in this warrant before the investment, I would have got $192,000 at the end of the day!
Banks offering these Huiyuan warrants must be making big losses that day, as they needed to buy shares in the market after the announcement to cover their hedges. So often banks are losing money due to one-time, irregular events. But the common masses don’t care. They already know that these banks have made so much money from selling warrants to the retail investors every trading day.
