The stock is trading today at a 6¢ premium over the $5.70 buyout price that PALM and HPQ announced yesterday.
At this point, technical analysis counts for nothing, obviously, and rumors and news are everything.
Kaufman Bros. is maintaining a buy rating, MKM Partners has downgraded the stock to neutral.
A Wayne, Pa. law firm, Ryan & Maniskas, is investigating whether PALM tried hard enough to get a bitter deal for shareholders.
A fairly universal stack of comments by analysts that the acquisition will be a good thing for HPQ by helping its entry into the smartphone market.
So, back to the question: Sell or hold? For my own account, I intend to hold for awhile. The worst that can happen under the negotiated deal is that I get $5.70 a share in cash. At best, under threat of a lawsuit, the parties will renegotiate and raise the ante. That's all according to Palm's SEC filing this morning.
The basis for my position is $8.28, so I'm going to lose. I did manage to reduce my basis sharply through a covered call and an additional share purhcase, like th is:
Jan. 20: Purchased shares for a $12.63 debit. Basis: $12.63.
Jan. 20: Sold call for an 83¢ credit. The call expired worthless. Basis: $11.80.
April 16: I double my shares for a $5.58 debit. Basis: $8.27
That's a $2.58 per share loss at the price announced yesterday. At this point, however, what I give up is 6¢ or 7¢ per share. That's not enough to overcome the possibility of bigger profits if the deal is somehow renegotiated.
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Disclaimer
Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.
New to private trading? Here's a look at How to Become a Private Trader.
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