All the recent corporate action in the form of IPOs (initial public offers), capital raisings and M&A (merger and acquisition) activity is an absolute boon for stock brokers and investment banks such as Macquarie Group Ltd (ASX: MQG) as they will reap millions of dollars in fees. It's also a welcome development for shareholders and can also be a great opportunity for astute investors to make small, quick profits.
Two companies which are currently in the spotlight of corporate activity are: David Jones Limited (ASX: DJS) and Lynas Corporation Limited (ASX: LYC) Here's why these two stocks are hot right now.
While many investors had no doubt already moved on thinking the action was over after South African-based Woolworths made a buy-out offer for David Jones, news this week that billionaire investor and occasional corporate raider Solomon Lew – who also happens to own a controlling interest in Premier Investments Limited (ASX: PMV) – has bought a stake in Australia's leading department store owner has investors wondering just what Lew may be planning.
Meanwhile Lynas Corp appears to have stemmed the bleeding which has seen its stock lose around 70% of its value in the past year. Lynas managed to complete a placement and capital raising totalling $40 million which appears to have bolstered investors' confidence in the company's balance sheet and has sent the stock price up nearly 30% in the past five days. Lynas owns appealing assets and the strengthening of its balance sheet alone could help the stock re-rate and likewise add to the appeal for potential suitors.
Other companies currently in the midst of M&A activity include Treasury Wine Estates Ltd (ASX: TWE) and Crowe Horwath Australasia Ltd (ASX: CRH). While it is now without risks, there can be plenty of opportunities to make a profit after a corporate action is announced to the market. The key for investors is to remain alert, act quickly and accurately assess the downside risks versus the upside potential.
