Yuanxi Zhang
Long/short equity, value, special situations

Net Servicos: 4.2% Gross Return In Three Weeks With Very Low Downside Risk

Recommendation: Long Net Servicos De Comunicacao SA (NASDAQ:NETC) at $12.50

Target Price: R 29.72

Thesis

Embratel and Embrapar are conducting a tender offer for all of the outstanding shares of Net Servicos (NET) at R 29.72. After hedging the currency exposure, shareholders can lock in a 4.2% gross return on the NET position. The time horizon of this special situation investment is likely to be less than three weeks. As the offer cannot be withdrawn, there is likely little downside to investors who can hedge well. Based on the above considerations, we suggest a long position in the stock while hedging their currency exposure.

A Brief Introduction of the Acquirer and the Target

Net Servicos de Comunicacao SA,...

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