Texas Hedgin’
Texas (and actual) hedges
June 22, 2026
Electronic Arts (EA) is set to be acquired by Silverlake and others for $210 per share in cash.
Key regulatory approvals have been secured; only CFIUS and the EU remain outstanding.
The deal offers a $7.84 net spread, implying a 20% IRR if it closes by September as expected.
Downside risk limited, with a break price around $175 and only a 5-10% probability of deal failure.
Electronic Arts (EA) signed a definitive merger agreement to get bought by Silverlake and other investors for $210 per share in cash. JP Morgan (JPM) is providing $20 billion of debt financing. So far they secured several needed approvals:
✔ HSR
✔ China
✔ Turkey
✔ Competition Canada
✔ Target vote approval
Outstanding:
CFIUS
European Union
There are no legitimate regulatory issues. The deal should and probably will close by September. If it does, the $7.84 net spread beneath the deal price offers a 20% IRR.
Caveat
Instead of spending time playing video games of people doing high speed activities – shooting guns, fighting in MMA, or driving fast – do actual high speed activities. Shoot guns, roll/fight, and drive fast in real life (obviously in the right environment). Physically not virtually. However fun these things are to play, they are more fun to actually do.
Conclusion
Regulators are likely to approve this one. Financing is committed. AI remains a threat. But there doesn’t appear to be an out under the merger agreement. It will probably close on current terms later this year. Probabilistically it is worth closer to $206-208 than the current market price. Even if it is worth $150 as a standalone, it would probably break to closer to $175 based on residual takeover premium and such a break is only around a 5-10% chance.
TL; DR
I own some EA; you might want to too. Nothing spicy but a reasonable merger arb.
June 23, 2026
When will EA’s take-private acquisition close? You can place your bet (or hedge) here. I expect the close by September and placed modest bets that it will not be before August, will be before September, October, and January 2027. Of those my favorite is the bet that it will be before October. This is a “Texas hedge” or long two highly correlated bets (the equity and prediction) because I think they’re both right. The Texas refers to wildcatters who when presented with financial tools to offload commodity risk from their physical production would occasionally use them to double down, betting on oil and gas instead of buying insurance.
Alternatively: actually hedge. I own EA here with the view that it is probably going to close with a high confidence. You can buy insurance against a deal break with the $0.09 bet that the deal doesn’t close before April 1, 2027. I have not bought that insurance but it is a convenient hedge and one that can sidestep some of the complications of equity investments especially on the short side. It varies with specific assumptions on break probability and price, but the right deal-break neutral hedge is about 1 EA share plus 35 Kalshi contracts with the equity costing $203.53 and the hedge costing another $3.15 per each EA share.