Current Discount: 23%
Average Discount: 16%
Expiration Date: TBD
This idea was shared by DiSam
BMW Group is a well-known manufacturer of luxury cars and motorcycles. The company has two share classes with identical economic value – ordinary voting shares (BMW) and non-voting preferred (BMW3). Due to significantly smaller free-float (57m vs 602m shares outstanding) and no voting power, preferred BMW3 shares were used to trade at a discount to ordinary BMW shares. Due to the recent market turbulence, the discount has widened from the average 16% to 23%, which marks an opportunity to play on the eventual discount mean reversion and pocket in 7% profit.
Dividends received by both share classes are equal + the preferred shares receive an additional €0.02/share of preferred dividends.
Overall, we believe that this widening is a result of recent market volatility caused by COVID and lockdown, and its a question of when and not if, it will return to the normal size.
Borrow is available on IB (4m shortable shares) and is quite cheap (1.6% fee/year).