4 Stocks Staging Big Gaps on Merger News

Dominion will buy SCANA in an all-stock deal worth $7.9 billion

Jan 3, 2018 at 10:29 AM
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Shares of MoneyGram International, Inc. (NASDAQ:MGI) gapped lower out of the gate this morning, down 9.3% at $12.07, after a U.S. government panel blocked the company's sale to China's Ant Financial. The $1.2 billion deal was scuttled by the Committee on Foreign Investment in the United States (CFIUS), reportedly over national security concerns -- though the committee declined to comment on the ruling. Under the terms of the deal, Ant Financial paid MGI a $30 million termination fee.

Chinese State Media Slams U.S. on MoneyGram Ruling

China-based Ant Financial is controlled by Alibaba Group (NYSE:BABA) CEO Jack Ma, and a report in the state-run Xinhua news agency broadly panned the U.S. decision to block the merger as "protective and isolationist." U.S.-traded BABA shares are shrugging off the news today, with the stock 0.5% higher at $184.54.

Ahead of last night's news, MGI's price action was already reflecting some pessimism that the long-delayed deal would come to fruition. The stock has slumped roughly 33% from its April 2017 highs near $18 per share, with resistance emerging at its 20-day moving average in recent months.

And from a sentiment standpoint, short interest still accounts for a healthy 8.2% of the equity's float, or nearly 7 times MGI's average daily trading volume. That said, the stock was down more than 10% at its early low of $11.90, so short selling is temporarily restricted on MoneyGram.

Dominion Scoops Up Scana in All-Stock Pact

In domestic M&A news, Virginia-based Dominion Energy Inc (NYSE:D) is set to acquire SCANA Corporation (NYSE:SCG) in an all-stock deal worth $7.9 billion (or $14.6 billion, including debt). The offer values SCG at $55.35 per share, representing a premium of more than 42% to last night's close at $38.87.

In early trading, SCG is up 22.2% at $47.50. The shares have gapped above resistance at their 50-day moving average for the first time since early August, though they're still trading well below Dominion's offer price.

Meanwhile, D has tumbled 4% to $77.08, with the utility stock deepening Tuesday's breach of recent support at its 80-day moving average. In light of today's bear gap, the equity's thinly traded options have rarely been more expensive to buy. According to Trade-Alert, 30-day at-the-money implied volatility on Dominion options has bolted to a new 52-week high of 18.1%.

 

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