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This model simulates the gain/loss when two companies A and B both issue new shares that they will exchange, so as to partially acquire each other. This is also called a partial stock swap, and the Swap Ratio is the number of new shares issued by company A divided by the number of new shares issued by company B.

Whether this results in a gain or loss to the shareholders of the two companies, depends on how many new shares are issued and swapped, compared to the intrinsic values of the two companies. This is only a "zero-sum game" when the fees are zero.

You should NOT adjust the intrinsic value for tax on dividends and capital gains, because that would distort the calculations. You also cannot specify the dividend tax in this model, because it cancels out in the formulas.

• Sim
• Sim Vary
• Dist

• ROIV A
• ROIV B
• ROIS A
• ROIS B

• This plot shows the Return on Intrinsic Value (ROIV) for the current shareholders of company A, when swapping new shares in company A with new shares in company B (Swap Ratio ), corresponding to of total shares in company A and of total shares in company B.
More
ROIV is invalid when the intrinsic value is zero or negative. ROIS also works in those cases.
The red box at the bottom shows the probability of loss for the current shareholders of company A.

• This plot shows the Return on Intrinsic Value (ROIV) for the current shareholders of company B, when swapping new shares in company A with new shares in company B (Swap Ratio ), corresponding to of total shares in company A and of total shares in company B.
More
ROIV is invalid when the intrinsic value is zero or negative. ROIS also works in those cases.
The red box at the bottom shows the probability of loss for the current shareholders of company B.

• This plot shows the Return on Issuance (ROIS) for the current shareholders of company A, when swapping new shares in company A with new shares in company B (Swap Ratio ), corresponding to of total shares in company A and of total shares in company B.
More
The red box at the bottom shows the probability of loss for the current shareholders of company A.

• This plot shows the Return on Issuance (ROIS) for the current shareholders of company B, when swapping new shares in company A with new shares in company B (Swap Ratio ), corresponding to of total shares in company A and of total shares in company B.
More
The red box at the bottom shows the probability of loss for the current shareholders of company B.

• ROIV A
• ROIV B
• ROIS A
• ROIS B

• This plot shows how different Swap Ratios would impact the Return on Intrinsic Value (ROIV) for the current shareholders of company A, when swapping  × Swap Ratio new shares in company A with new shares in company B.
More
ROIV is invalid when the intrinsic value is zero or negative. ROIS also works in those cases.
The x-axis shows a range of Swap Ratios around , which is marked as a dashed blue line.
The y-axis shows the Return on Intrinsic Value (ROIV) for the current shareholders of company A.
The red box at the bottom shows the probability of loss for the current shareholders of company A, when the Swap Ratio is .

• This plot shows how different Swap Ratios would impact the Return on Intrinsic Value (ROIV) for the current shareholders of company B, when swapping  × Swap Ratio new shares in company A with new shares in company B.
More
ROIV is invalid when the intrinsic value is zero or negative. ROIS also works in those cases.
The x-axis shows a range of Swap Ratios around , which is marked as a dashed blue line.
The y-axis shows the Return on Intrinsic Value (ROIV) for the current shareholders of company B.
The red box at the bottom shows the probability of loss for the current shareholders of company B, when the Swap Ratio is .

• This plot shows how different Swap Ratios would impact the Return on Issuance (ROIS) for the current shareholders of company A, when swapping  × Swap Ratio new shares in company A with new shares in company B.
More
It is not a mistake that this plot looks quite different from the ROIS plot for the other company. It is because the new number of shares in company B is held constant at , while the new number of shares in company A varies with the Swap Ratio. This means the issuance amount for company B is constant in the calculation of its ROIS ratio, while the issuance amount varies in the calculation of the ROIS ratio for company A. This tends to make the plot for company A look more curved, while the plot for company B looks more linear.
The x-axis shows a range of Swap Ratios around , which is marked as a dashed blue line.
The y-axis shows the Return on Issuance (ROIS) for the current shareholders of company A.
The red box at the bottom shows the probability of loss for the current shareholders of company A, when the Swap Ratio is .

• This plot shows how different Swap Ratios would impact the Return on Issuance (ROIS) for the current shareholders of company B, when swapping  × Swap Ratio new shares in company A with new shares in company B.
More
It is not a mistake that this plot looks quite different from the ROIS plot for the other company. It is because the new number of shares in company B is held constant at , while the new number of shares in company A varies with the Swap Ratio. This means the issuance amount for company B is constant in the calculation of its ROIS ratio, while the issuance amount varies in the calculation of the ROIS ratio for company A. This tends to make the plot for company A look more curved, while the plot for company B looks more linear.
The x-axis shows a range of Swap Ratios around , which is marked as a dashed blue line.
The y-axis shows the Return on Issuance (ROIS) for the current shareholders of company B.
The red box at the bottom shows the probability of loss for the current shareholders of company B, when the Swap Ratio is .

• These plots show the probability distributions for the Intrinsic Values of the two companies A and B to their current shareholders before the stock swap.
• The two plots also show the current Market-Caps as dashed blue lines, so you can easily see how they compare to the Intrinsic Values.