Value investing · Course 15 of 39 · The practice
Special situations
Spin-offs, mergers, tender offers, rights offerings, companies leaving bankruptcy and holding companies: events that set a price for reasons other than value.
For a reader who can value a company and wants to know when an event, not the business, sets the price.
After it you can read the filing behind each event, find who is forced to sell, and set the price against your own estimate of value.
It assumes Valuation in practice, and draws on Management and capital allocation and Credit for equity investors.
Each lesson takes one mechanism apart: the Form 10 a spin-off files, the probability a merger's spread implies, the terms of a tender offer, the dilution a rights offering forces on a holder who does nothing, the balance sheet a company carries out of Chapter 11, and the discount a holding company trades at against the stakes it owns.
The method, not the running of it
Special situations is 7 lessons on running the whole method on one company. Running it is the part that only happens against real filings, on a real date, and this course has none of yours. It also cannot tell you the day one of your reasons stops being true, which is the part that matters after you have bought.
See our methodology for how the product reads a filing and what it refuses to compute.