market folly

John Paulson's hedge fund Paulson & Co just filed a 13D with the SEC on shares of MetroPCS (PCS).  Per the filing, Paulson owns 9.9% of PCS with 36,300,000 shares.  The main purpose of the filing is to say that they sent a letter to PCS saying that they intend to vote against the merger with T-Mobile.

This marks an increase in their position size by around 14% since the end of 2012. The filing was made due to activity on February 28th.


Why Paulson Is Voting Against the Merger's Current Terms

In their SEC filing, Paulson outlines a few reasons as to why they don't like the current deal:

- Too much debt
- Interest rate too high
- Too much equity risk for MetroPCS shareholders
- Unfair equity split
- MetroPCS is performing better than T-Mobile
- PCS better off as a stand-alone company

Paulson believes "in the strategic merits of a transaction but are opposed to the current deal terms."  They would support the deal if the intercompany debt was reduced along with the interest rate.  They also noted they would consider a combination of debt reduction, added cash and/or a higher exchange ratio for PCS shareholders.  You can view Paulson's entire thoughts in their SEC filing here.