An easy way to make money from HBOS shares?

Reaper

Here's a thought - tell me if it's rubbish, and why.

At the time of writing HBOS shares are worth a lot less than the Lloyds TSB offer price. So if you buy them now you could expect to make roughly 50% profit when they convert to Lloyds TSB shares (if I got my maths right).

The only reason you wouldn't do this is if you thought the deal would not go through or it was renegotiated at a lower rate, which is what the city expects.

However according to the press this is what those involved have been saying:

* "On Tuesday, Lloyds said the deal was on track and should be completed by the end of 2008"
* "speaking to Sky News, Mr Brown said that after having spoken to those concerned, he was confident the deal would go ahead"
* an HBOS spokesperson said it was "full steam ahead"
* BBC business editor, Robert Peston, said people close to the deal had told him there was no chance that Lloyds would change the terms of the takeover

So unless you don't believe them all maybe we should be buying HBOS shares???

dunstonh

So unless you don't believe them all maybe we should be buying HBOS shares???

You have part of it right. If the deal goes through unchanged and you buy now then you make a good profit. However, if the deal is renegotiated then you could possibly buy shares at a higher price than the revised deal.

In worst case, Lloyds could withdraw and let HBOS follow the same route as B&B and pick up the assets after its nationalised. In which case shareholders would see a total loss.

So, do you take a chance for a good gain but accept the potential for a total loss? That all comes down to your risk profile and ability to be able to afford a high risk punt like this.

napoleon

The best way to make money from HBOS shares is to have sold them about 18 months ago when they were over £11 per share. :rotfl:

SilverScooby

Robert Peston said the same thing earlier this morning.

http://www.bbc.co.uk/blogs/thereporters/robertpeston/

Folks on FT Alphaville reckoned he was doing this as Gordon Brown's mouthpiece.

HBOS Share price rocketed up to 177p but now lost some of its gains - currently 156p

On the basis of HBOS 156p, LLOY 261p, offer of .833 LLOY shasre per HBOS, makes offer price 217p.

But of course if LLOY share price goes through the floor it's possible to make a loss as the offer is shares not cash