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Avis Buys Zipcar: Go On, Take the Money and Run

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Car-sharing titan Zipcar (Nasdaq:ZIP) is up 49% today to $12.25 on news that Avis Budget Group (Nasdaq:CAR) would acquire the company for $12.25 per share, or about $500 million.

It is a bit unusual for stocks to trade exactly at their takeover prices on the announcement of a deal -- usually, the stock trades a bit lower than the takeover price to account for issues like the time value of money and the probability of the deal not going through.

However, keep this in mind: the deal is set to close this Spring (not much time), and interest rates are extraordinarily low. So, the present value of $12.25 this Spring isn't far off from $12.25.

Therefore, traders are placing a virtual certainty on the deal getting done.

One interesting wrinkle though -- for some reason, TechCrunch is highlighting a lawsuit from litigation firm Powers Taylor alleging that Zipcar/Avis are shortchanging shareholders.

Their evidence?

From the press release:

Notably, at least one analyst with Yahoo! Finance has estimated that the true inherent value of Zipcar could be as high as $13.00 per share, well above the proposed sale price.

That analyst is almost certainly Paul Coster of JP Morgan, who has a $13 target price, according to Bloomberg.

Sounds like fluff to me.

But either way, the best move in these types of situations is to take at least SOME money off the table, even if you believe a higher bid is in the cards.

A lot of people have gotten burned in stocks like Take-Two Interactive (Nasdaq:TTWO), Best Buy (NYSE:BBY), Avon Products (NYSE:AVP), and Harman (NYSE:HAR) because they thought higher bids were in the works. And when the deals were cancelled, the stocks crashed, and not a single one is remotely close to its post-bid high.

Best Buy still has a chance at being taken out, but it's down over 40% since company founder Richard Schulze started making moves for a deal back in August of 2012! That hurts

Most deals that get announced do get done, but still, who wants to get left holding the bag in case things go south?
POSITION:  Position in BBY,TTWO
TICKERS:  NYSE:BBY, NYSE:CAR, NASDAQ:ZIP   

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