Chasing fruitless arbitrage

Decoding whether reverse merger offers any predictable arbitrage opportunities

- Udhayaprakash

In the world of investments, arbitrage opportunities are quite popular among investors. In simple terms, they are opportunities that arise when a stock can be acquired at different prices. For instance, if a stock trades at different prices on two different exchanges, investors can gain from the arbitrage.

There is a widespread belief that arbitrage opportunities also arise during reverse mergers (when the parent company merges with its subsidiary). This is because investors can acquire the parent company’s shares at a premium or a discount through merger allotments.