As long as APH is at least 2.8201 times the share price of NUU the math works.
Example, APH at $15 and NUU at $5 = $15/$5 = 3. 1000 shares of APH would be sold for $15,000 and 3,000 shares of NUU bought that would convert back to 1,063 shares of APH.
There were five days between Feb 1st and March 3rd that the above math held true during some part of the day including at any time on February 27th. On February 27th, the greatest spread would have resulted in 1,098 shares on APH being realized on the back conversion at the time of closing. The $0.60 per share is what can be referred to as the icing on the cake under these circumstances as even under our share count break even analysis above, the investor would also receive 2,823 x $0.60 = $1,693.80 in cash (2,823 shares of NUU at $0.60 per share).
Factoring in the cash component
Many gravitate to the same concept as the transaction fees but in reverse. In the transaction fee examples above, we needed get an extra $0.02 in total gain in share prices to offset the transaction fees and the trap here is too often people use the $0.60 per share in the same manner.
For example, in the breakeven example, what if the share price was say $12.00 rather than $13.89? That would translate into 2,396 shares of NUU including the $20 in transaction fees. 2,396 NUU shares converts into 849 shares of APH plus $1,597.20 in cash which would buy 133 shares of APH after the $10 transaction fee. That is 982 shares in total of APH and a lot of effort to only end up with fewer shares.
Let’s now see why the cash component can trap some investors. If the share price of NUU was $5.49 some expect that to be the same as in the breakeven scenario since there is in effect is $0.60 subsidy. Re-running the scenario with NUU at $5.49 yields 2,526 shares of NUU which converts back into 895 shares of APP plus $1,515.60 in cash. That cash is effectively $1,505.60
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