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I hold three call options of Slack.

  • Average price bought: 15 * 3 = 4500;
  • Book Value: 45

The current price for each call option is $18, and the stock is trading at $43.

According to the press release:

Under the terms of the agreement, Slack shareholders will receive $26.79 in cash and 0.0776 shares of Salesforce common stock for each Slack share, representing an enterprise value of approximately $27.7 billion based on the closing price of Salesforce's common stock on November 30, 2020.

With Salesforce buying Slack, what is the amount of cash and stock I would be getting?

1 Answer 1

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Your contracts will be adjusted to reflect the delivery of 7 shares of Salesforce common plus $2,679 plus cash-in-lieu for .76 shares.

Here's an example of a cash plus stock merger:

Date: May 31, 2017 RE: Cascade Bancorp ("CACB") Merger COMPLETED with First Interstate BancSystem, Inc. ("FIBK") Shareholders of Cascade Bancorp ("CACB") voted on Wednesday, May 24, 2017, and approved a proposed Merger between CACB and First Interstate BancSystem, Inc. ("FIBK"). Pursuant to the terms of the Merger, each share of CACB Common Stock outstanding immediately prior to the consummation of the Merger will be converted into the right to receive 0.14864 of a share of FIBK Common Stock, plus $1.91 cash. The Merger became effective on Tuesday, May 30, 2017.

Contract Adjustments

Pursuant to Article VI, Section 11 and 11A, of OCC's By-Laws, all outstanding CACB options shall be adjusted as follows. On Wednesday, May 31, 2017, each adjusted Cascade Bancorp contract will require the receipt or delivery of: (A) 14 shares of FIBK Common Stock; plus (B) $191.00 cash; plus (C) cash in lieu of 0.864 fractional share of FIBK Common Stock. Premiums for the adjusted Cascade Bancorp options will continue to be calculated on the basis of a multiplier of 100, i.e., for premium and strike-price extensions, 1.00 will equal $100.

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  • Thanks Bob, will that not be in loss for me provided i invested 4500 for 3 lots of slack?
    – Thalapathy
    Dec 2, 2020 at 1:31
  • The merger doesn't cause you to gain or lose value. It merely changes the terms of the option contracts which is a real headache to decipher. At the moment, your cost basis per contract (not lot) is $15 and it's trading at $18. If the stock collapses, some or all of that $18 will be lost. If it rises nicely, you'll profit even more. The adjustment isn't the problem (other than understanding it) but rather, is the stock going to do well going forward? This might help you understand what's going on. Dec 2, 2020 at 3:41

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