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Comment by koolba | Hacker News Reader

GrubHub would be wise to take the money and run. If it’s cash bank it. If it’s stock, buy some Uber puts.

The economics of last mile delivery can not justify these valuations so if Uber thinks they can make it happen with driver downtime then grab the cash while you can.

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I’m pretty sure you can’t take a short position against the interests of your own company. That’s boilerplate language in the deals I’ve seen, for obvious reasons.

I think that was hyperbole to emphasize the imprudence of the takeover offer.

Some companies will allow this, but only if it's a covered call or protected put on an investment that you own. The idea is that you're limiting your risk while also limiting the potential upside of the investment.

Carl Icahn may have found a way around this kind of restriction after the Lyft IPO by selling in a private transaction to someone who hedged in advance of the sale, although it's not at all clear what really happened.

https://www.bloomberg.com/opinion/articles/2019-05-07/lyft-s...

It's almost certainly going to be all-stock and any takeover will prevent anyone receiving shares from buying puts or shorting stock of the acquirer for the duration of the lockup. If you are an insider buying puts now you could also potentially look at some jail time.

> If you are an insider buying puts now you could also potentially look at some jail time.

Information is public at this point, you might breach a contract if you've got equity but it's not jail time. Assuming recent regulatory actions, even if your actions were egregious, it's likely no jail time, just a large fine and disgorging profits made.

Disclaimer: Not a lawyer, not your lawyer.

There is definitely material information with respect to this deal that is still not yet public and trading on it, or even appearing to trade on it, would absolutely risk jail time.

I agree with you in the event you are someone with access to material non-public information. Your average IC outside of legal or finance is unlikely to have such information. My argument is that the potential transaction itself is now public. Obviously, if you have material non-public information, you should not trade on that unless you want to end up in a Matt Levine piece.

Insider meaning someone who knew about this deal. If you are an insider shorting things before deals are announced, you absolutely can face criminal charges which can include a prison sentence.

> you absolutely can face criminal charges which can include a prison sentence.

You can (the chance is not 0), but the chances are very rare based on recent historical SEC enforcement actions. I'm not advocating for securities fraud, I'm expressing the observation of lax enforcement by the SEC.

https://www.sec.gov/files/enforcement-annual-report-2019.pdf

Have fun taking your chances on that.

It's possible that executive insiders at Grubhub could be prevented from buying puts via a deal contract, but I can't see how members of the general public could possibly be limited by these sorts of deal terms.

It states in the article that it will be all stock. You take all these meal delivery companies, mix in other frothy VC-funded nonsense of uber and somehow end up with a triple-A portfolio made entirely of dog shit.

I wonder if any execs at grubhub might be True Believers(tm) in their industry and genuinely believe in the market and "synergies" enough from a deal like this to not immediately take out a big hedge or put a collar on their payout. I imagine investors wouldn't want to be stuck exposed to uber stock and would financially engineer away that exposure after a deal, but some of the executives could want that exposure?

The market can stay irrational longer than you can hold OTM Uber puts.

That doesn’t matter. The point is to maintain the valuation until your lock up period expires. Once you can actually sell the stock you don’t need the puts.

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