In my last post on Satara I signaled that discussions were ongoing given that one of the five interest groups didn’t vote in support with a great enough majority (74.8% in favour, rather than the 75% required).
The company called another meeting and the results are in: the 74.8% turned into 88%.
That means the merger is going ahead! I had added to my position after the first failed vote, when the price dropped despite the strong signals that management were pursuing another vote.
All up, it’s an insane internal rate of return (almost 500%) given the short time frames.
In absolute value it’s a 25% return, spread over a year, but with the vast majority of the cash coming in the next two weeks.
I still could have been wrong
One thing to keep in mind: in my first post on Satara I posed the question “does this merger succeed 67% of the time?” (required to get a positive NPV). I answered that I thought it did.
The fact that it did doesn’t mean that I was right. It’s one data point – the smallest sample size of all. It’s a tiny bit of evidence. But equally, if the merger had failed it wouldn’t have been proof that I was wrong either.
I think about these things in a probabilistic sense and it’s important to not get swayed by tiny (but important) bits of evidence.