In recent news Clearwire Corp. is looking to merge with Sprint Nextel Corporation. Clearwire has recently backed out on a potential deal with Dish Network and if the merger were able to go through, Sprint would acquire around 50% of stock in the company. Some of the investors within Clearwire that would benefit from this deal are Comcast, Crest Financial, and Mount Kellet Capital. Although the deal for Clearwire has not gone through yet, the company noted that it wants shareholders to vote in favor for the merger with Sprint. Sprint announced the bid for Clearwire at a rate of 5$ per share which would put the value of Clearwire at 14$ billion. It beat out Dish’s bid of $4.40 per share and has made investors who were unsure of Sprint’s previous bids now on board with the merger. If the deal does not go through the largest shareholders of Clearwire, who own a total of 9% of the company, have announced they will still sell their shares to Sprint.
One of the reasons for the aggressive move from Sprint is that they are looking to utilize Clearwire’s spectrum where it will be able to build out a strong LTE network. By doing this it will allow them to better compete with companies like Verizon who have already started the process for plans to start their own LTE network. If Sprint were able to acquire Clearwire they also hope to improve their high-speed data network and wireless services.
My Trade: Buying the CLWR Jan 2014 5-5.5 Bull Call Spread for $.07
Risk: $7 per 1 lot
Reward: $43 per 1 lot
Breakeven: $5.07
Greeks of this Trade:
Delta: Long
Gamma: Long
Theta: Short
Vega: Long
(Disclaimer: I am long the CLWR Jan 2015 4 Calls)