Dual-class arbitrage trading is a simple three-step strategy.
1) Identify two publicly traded stocks of the same company at different prices.
2) Short the high-priced shares (X) and buy the low-priced shares (Y). Pocket X-Y.
3) Sell Y and buy X when the price of X and Y are equal.
Heico Corp. fits the bill. The company produces aircraft-engine parts such as combustion chambers, heatshields, landing gear, and hydraulics. Heico also builds equipment used in ground-support operations and provides repair and maintenance services.
My broker, IB, indicates there’s ample liquidity to short at least 1,000 shares today.
Heico has 20 million publicly traded common shares and 13 million publicly traded A-shares. All have identical cash-flow rights.
HEICO Class A Common Stock (HEI.A, Financial) and HEICO Common Stock (HEI, Financial) are virtually identical in all respects, except for voting. HEICO Class A Common Stock carries one-tenth of a vote per share, while HEICO Common Stock carries 1 vote per share.
The historical spread of HEI versus HEI.A:
Disclosure: This is not a recommendation to buy, sell or short anything. I had no position in any of the stocks mentioned at the time of writing.
-EDIT- 27 oct 2011
Long HEI.A & short HEI
Idea 1 - Lennar: http://www.gurufocus.com/forum/read.php?2,147502,147637#msg-147637
Idea 2 - Hubbell: http://www.gurufocus.com/news/147753/dualclass-arbitrage-idea-2--hubbell
Idea 3 - Viacom: http://www.gurufocus.com/news/147826/dualclass-arbitrage-idea-3--viacom
1) Identify two publicly traded stocks of the same company at different prices.
2) Short the high-priced shares (X) and buy the low-priced shares (Y). Pocket X-Y.
3) Sell Y and buy X when the price of X and Y are equal.
Heico Corp. fits the bill. The company produces aircraft-engine parts such as combustion chambers, heatshields, landing gear, and hydraulics. Heico also builds equipment used in ground-support operations and provides repair and maintenance services.
My broker, IB, indicates there’s ample liquidity to short at least 1,000 shares today.
Heico has 20 million publicly traded common shares and 13 million publicly traded A-shares. All have identical cash-flow rights.
HEICO Class A Common Stock (HEI.A, Financial) and HEICO Common Stock (HEI, Financial) are virtually identical in all respects, except for voting. HEICO Class A Common Stock carries one-tenth of a vote per share, while HEICO Common Stock carries 1 vote per share.
The historical spread of HEI versus HEI.A:
Disclosure: This is not a recommendation to buy, sell or short anything. I had no position in any of the stocks mentioned at the time of writing.
-EDIT- 27 oct 2011
Long HEI.A & short HEI
Idea 1 - Lennar: http://www.gurufocus.com/forum/read.php?2,147502,147637#msg-147637
Idea 2 - Hubbell: http://www.gurufocus.com/news/147753/dualclass-arbitrage-idea-2--hubbell
Idea 3 - Viacom: http://www.gurufocus.com/news/147826/dualclass-arbitrage-idea-3--viacom
