BMW Group (BMW.DE) – Discount Mean Reversion – 7% Upside

Current Discount: 23%

Average Discount: 16%

Upside: 7%

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).

bmw discount

1 Comment

1 thought on “BMW Group (BMW.DE) – Discount Mean Reversion – 7% Upside”

  1. The discount has not narrowed for 5 months already, so with no apparent timing or catalyst ahead, the idea is closed with -1% in 5 months


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