Over the last one month i have worked on understanding special situation (risk arbritrage) investments in general and rights issue, delisting and demerger in particular. I think these are one of the best ways to earn MARKET NEUTRAL return. Ofcourse ‘Shit happens’ and special situation and if our analysis goes wrong downside can be huge & permanent loss of capital.
Please find below checklist which I have put together, which is mostly a compilation from Neeraj Marathe, Ashish Kila and Sanjay Bakshi blog. Please note that I do not have much practical experience in specialsituation investmentand the intention in putting up the checklist is to seek guidance from senior investors and learn together with other investors who like me have not yet participated in special situation investment.
Please suggest if no notice any errors or you think any importantadditional steps which you think I might have missed.
Here are some excellent resources to begin with
Rights issue basics: http://neerajmarathe.blogspot.in/2012/04/rights-issues-get-it-right.html
Playing delisting cases: http://neerajmarathe.blogspot.in/2011/04/playing-delisting-cases.html
How to evaluate delisting cases. This is an excellent presentation by Ashish Kila, CIO of perfect research, where he has explained the entire delisting process and the past cases in which delisting failed. http://goo.gl/Oyf2y
Can you teach risk arbitrage(Sanjay Bakshi) - http://fundooprofessor.wordpress.com/2012/10/20/teach/
Special-situation-checklist.xlsx (10.1 KB)