Could the investigation by Kahn Swick & Foti delay or jeopardize the completion of the Nexstar acquisition?
Impact of the Kahn Swick & Foti investigation
The filing by former Louisiana Attorney General Charles Foti and Kahn Swick & Foti (KSF) adds a fresh legal‑risk layer to the already announced $22‑per‑share cash deal between TEGNA (TGNA) and Nexstar (NXST). The investigation is limited to whether the transaction price and the process that produced it are “adequate,” which typically translates into a shareholder‑class‑action or a request for a fairness hearing. In most M&A cases, such suits do not automatically halt a deal; they can delay closing by weeks or months while the parties negotiate a settlement or the court rules on a fairness injunction. Unless the court finds a material breach of fiduciary duty, the transaction is likely to survive, but the added uncertainty will keep the spread between TGNA’s current market price and the $22 cash offer tighter and could force the acquirer to allocate extra “contingency” cash or amend the purchase agreement.
Trading implications
TGNA (NYSE: TGNA): The stock is trading below the $22 offer (the sentiment score –40 reflects a modest downside bias). With the investigation, expect heightened short‑term volatility and a potential “failure‑to‑close” premium erosion. For risk‑averse traders, a cautious approach would be a short‑dated put spread (e.g., sell a $21 put, buy a $20 put, expiring in 4‑6 weeks) to capture premium while limiting exposure if the deal ultimately closes. Pure outright short positions are riskier because a surprise settlement or court approval could trigger a rapid rally back to $22.
NXST (NASDAQ: NXST): Nexstar’s price is less sensitive because the cash outflow is a known line item, but a delay could pressure its balance sheet and earnings guidance. A neutral to mildly bullish stance (e.g., buying a 30‑day call spread 10‑strike above current price) may be appropriate if you believe the acquisition will still close and the market will price in the eventual cash‑flow hit.
Overall: Keep a close eye on any court filings or SEC disclosures over the next 2‑3 weeks. A material development (e.g., a judge ordering a fairness hearing) would likely push TGNA lower and increase the probability of a “break‑fee” scenario that could benefit short‑term sellers. In the absence of a decisive ruling, the market will likely price the deal as high‑probability but with a 10‑15 % risk premium, so position sizes should reflect that tail risk.