Silverbull,
I don't see the merger deal coming about like you do. I really think the relative share prices had less to do with it, than what is descibed below, although I will concede that relative share prices do reflect, albeit in an imperfect way, the intrinsic value of the company.
The two companies meet, each describes what they have to the other, and both do whatever amount of due diligence they decide is appropriate. Opinions of value of each company are discussed, ECU says, "we think we're worth X" and we think AUMN is worth y." AUMN does the same. Turns out x and y are relatively close and after a little wrangling, they agree that the value of both companies is pretty equal, so we'll merge as equals, with each company bringing approximately the same value to the merged entity.
Now, however, when they compare outstanding shares, fully diluted, they find that ECU has 20 times more shares than AUMN, so if their company values are equal, then one hare of ECU is only equivalent to 1/20 of a share of AUMN. So that's where the ratio comes from.
Next, what was the share price of ECU at the time the above was settled upon - I don't know, perhaps .78, and perhaps AUMN was at $20 at the same time. We all know we're not dealing with angels in this business, so perhaps a bit of a leak and what would be the result - well, right before the announcement, lo and behold, the prices were just about at that 1:20 ratio - hate to say it, but likely not a coincidence.
But, when you think about it, if there had been zero leakage of the deal, then, perhaps, we would have been at .80 on Thursday close, and on Friday morning, post announcment, we head up toward a buck and AUMN heads down to meet us at some point of equilibrium. If the above is accurate, did a few people make ill-gotten gains - yes; but we're we slickered out of anything - not that I can tell.
