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Cash after acquisitions
Sekuri Jouri
posted

I had understood that cash is added back to the portfolio balance during backtesting if mergers and acquisitions result in delisting of the stock and a cash equivalent distribution. In the attached backtest, however, I don't see cash added back to the portfolio after WYE was acquired by Pfizer on Oct 15 2009. There should be about $50 per WYE share back in my portfolio based on this: http://www.pfizer.com/files/investors/Pfizer_Wyeth_FAQ.pdf

Am I missing something?

Also, not exactly sure what happens if the merger/acquisition results in a stock swap. e.g. I remember trying Sun Micro shares (JAVA) and I don't remember ORCL stock put back in my portfolio. Any guidance here would be helpful. Thanks

1 response
Alisa Deychman

Hi Sekuri,

Mergers and acquisitions can come in a variety of flavors. At the moment, we don't handle all of them gracefully. In this scenario, we only compute the stock ratio adjustments in your portfolio and ignore the cash transaction.

In general, if its a straight merger with only stock transacted between company A and company B, your stock positions get re-evaluated in your portfolio according to the new terms. The old stock will persist in your universe, but will be static with no pricing updates. The new stock will continue to receive trade data.

Best,
Alisa

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The material on this website is provided for informational purposes only and does not constitute an offer to sell, a solicitation to buy, or a recommendation or endorsement for any security or strategy, nor does it constitute an offer to provide investment advisory services by Quantopian.

In addition, the material offers no opinion with respect to the suitability of any security or specific investment. No information contained herein should be regarded as a suggestion to engage in or refrain from any investment-related course of action as none of Quantopian nor any of its affiliates is undertaking to provide investment advice, act as an adviser to any plan or entity subject to the Employee Retirement Income Security Act of 1974, as amended, individual retirement account or individual retirement annuity, or give advice in a fiduciary capacity with respect to the materials presented herein. If you are an individual retirement or other investor, contact your financial advisor or other fiduciary unrelated to Quantopian about whether any given investment idea, strategy, product or service described herein may be appropriate for your circumstances. All investments involve risk, including loss of principal. Quantopian makes no guarantees as to the accuracy or completeness of the views expressed in the website. The views are subject to change, and may have become unreliable for various reasons, including changes in market conditions or economic circumstances.