Did you see the recent news? Cooper Tire is being sold to Goodyear and the Invested Dads discuss the details. They discuss Cooper’s history, the deal between the two tire companies, and what that means for Cooper Tire and the Findlay community. All of this and more on this week’s episode!
Main Talking Points
[0:54] – Cooper Tire & Rubber Company
[6:15] – The Deal
[11:06] – Benefits for Goodyear
[17:04] – Dad Joke of the Week
[17:52] – The Talk in the Past
[19:53] – What Does This Mean for Cooper Tire?
[21:46] – What Does This Mean for Findlay?
[25:25] – Invest in Tires?
Links & Resources
Goodyear to buy Cooper Tire – CNBC
Invest With Us – The Invested Dads
Free Guide: 8 Timeless Principles of Investing
Social Media
Full Transcript
Intro:
Welcome to The Invested Dads Podcast, simplifying financial topics so that you can take action and make your financial situation better. Helping you to understand the current world of financial planning and investments. Here are your hosts, Josh Robb and Austin Wilson.
Austin Wilson:
All right. Hey, Hey, hey. Welcome back to The Invested Dads Podcast, a podcast where we take you on a journey to better your financial future. Today we are going to be talking about this week’s big news, especially if you are in or around Findlay, Ohio. And that news is that Cooper Tire and Rubber Company, with its global headquarters and one of its tire plants located here in Findlay, will be bought by Goodyear Tire and Rubber.
Josh Robb:
Based on the agreement in the stock price movement I think it will be a good year for them.
[0:54] – Cooper Tire and Rubber Company
Austin Wilson:
Yeah, I see what you did there. We’ll get to the stock price reactions in a little bit, but yeah, let’s kind of just 50,000 feet like we usually do, start up there. What does Cooper Tire and Rubber Company do?
Josh Robb:
Well it’s hard to tell by the name. It’s a confusing one.
Austin Wilson:
I know, it’s cryptic.
Josh Robb:
But they do make tires for vehicles.
Austin Wilson:
It’s probably rubber.
Josh Robb:
And it’s out of rubber, surprisingly.
Austin Wilson:
Yeah, so let’s do a little history lesson. So if you’re not familiar with Cooper you’re going to be familiar with Cooper right before they get bought. So they are headquartered in Findlay, Ohio, which is where we’re recording this, so we obviously know the company pretty well. But let’s go back before Josh was even born, the early 1900s. So there were two guys named John Schaffer and Claude Heart, these were brothers-in-law. So Jordan, if you’re listening and we want to start a business like a tire company, brother-in-laws brothers-in-law, I don’t know which way to say that. It can work. But anyway, they bought this company called M&M Manufacturing Company in Akron, Ohio in 1914, and I don’t think they made M&M’s.
Josh Robb:
M&M Manufacturing, so M&M&M is really…
Austin Wilson:
M&M&M, triple M.
Josh Robb:
It’s 3M, that’s the company I guess.
Austin Wilson:
I bet that’s not it. But anyways… M&M, they bought it in 1914. This company did not make tires, they made tire patches, tire cement, and repair kits for tires. So they were in the industry but not quite there. The next year in 1915, they bought Giant Tire and Rubber Company. So they only made large tires.
Josh Robb:
Apparently.
Austin Wilson:
Like really large.
Josh Robb:
Monster truck tires.
Austin Wilson:
Like in 1915, but actually I have no idea what kind of tires they made, but that was the tire company name. And actually they didn’t actually make tires, they were tire re-builder. So they would take bad tires and repair them, fix them, and sell them again. And actually, especially today in terms of semi-tires, bus tires, happens all the time. Your run of the mill passenger tires does not happen, that’s not safe. But you do do re-treading when you go to big tires.
Josh Robb:
Oh, interesting.
Austin Wilson:
Yeah, really big tires. I’m sure like tractor tires are the same way, there is just so much tire there.
Josh Robb:
Re-tread them.
Austin Wilson:
Yeah. So anyway, that is a little knowledge nugget for you there. So two years later, now we’re up to 1917, they moved their operations to Findlay Ohio. And in that same year Ira Cooper joined Giants board of directors. So Giant, the company we just talked about, their board of directors. But then he started his own company called the Cooper Corporation, and they began making tires in 1920. So throughout the ’20s there was a lot of consolidation in the industry, which we’re kind of seeing. It’s the ’20s and we’re seeing consolidation in the industry.
Josh Robb:
History repeats itself.
Austin Wilson:
Man, it’s craziness. But in 1930 Cooper and Giant merged with another company called Falls Rubber Company, which was really small but I had to note it. And then the company Master Tire and Rubber Company was formed in 1930. Well Ira Cooper died in 1941, but that company went on to be very instrumental in the US supply chain, as it pertained to supplying tires, pontoons, life jackets, even tank decoys during World War II. And after World War II, I don’t know if this is in remembrance of him or whatever, but the company was renamed Cooper Tire and Rubber Company even though he was no longer there.
Josh Robb:
Yep. Which is always crazy to think how a lot of these factories did repurpose their whole manufacturing for the war effort, which is just crazy. So it’s been here in Findlay, Ohio for over a century.
Austin Wilson:
Over a century. In fact I used to work at Cooper tire. So I started my career there, actually in late 2013 when I was wrapping up college. And first couple of real people jobs were there, and that’s kind of how I got to know finance because I worked in finance there. Well I was there when they celebrated their Centennial or whatever, which was pretty cool. So anyway, it was a good tire place to start my career and helped me kind of get to where I am to be able to do this for you guys today.
But anyway, Cooper Tire was one of the most instrumental and influential companies in building Finley as we know it. So think back 100 years, thousands and thousands and thousands and thousands of people have been employed either directly or indirectly by Cooper Tire and the jobs that they provided. Whether that be in the headquarters, which is here in Findlay, or the Findlay tire plant, that’s huge. Those are millions and millions and millions, and maybe billions of dollars into the economy over the last 100 years. So Findlay has a soft spot for Cooper, so that’s why it’s noteworthy today that we put this episode out right away so that our listeners can kind of get an idea of that. This is such a somber feeling episode.
Josh Robb:
It is. And for me, both my family and actually my wife’s family, there’s history at Cooper as well. And growing up on my mom’s side there was generations there that worked at Cooper and we’re very instrumental in pieces of that Cooper. So that legacy whenever you drive by the factory you’re like, oh yeah, that’s right. There’s history there. Which we heard the news this morning, we’re recording this Monday morning when the news came out. So just trying to think through it, and we’re going to talk through what that means as we go through it.
[6:15] – The Deal
Austin Wilson:
Yeah. So let’s kind of break down the deal because there is a deal.
Josh Robb:
There is a deal.
Austin Wilson:
And we’re going to link an article with a lot of these details in the show notes. And this is an article from CNBC, it’s reliable, it’s got the details. So as of this morning, I’ll also at the same time that earnings were released, they kind of put it all out at the same time. Goodyear said it would buy Cooper Tire and Rubber Company in a $2.8 billion deal. It sounds like a lot of money.
Josh Robb:
It’s a lot of money.
Austin Wilson:
In fact it’s 20 some percent over what Cooper was trading at in terms of market cap by itself on Friday. And really if you think about the intention of this, the intention of this is so that Goodyear can get some of the good things that Cooper has going for it that it envies, it wants those things. And so namely what that is is the light truck and SUV tires.
So Cooper has a really good line, their Discover line is their most famous. And I’ve had those on vehicles before, they’re great tires. But the people love those tires and they do very well. And generally speaking the bigger the tire you make the more profit margin you have. So it’s a very high margin business in terms of tire margins. Tire margins are not high when you compare them to software margins, but for what they are truck tires have pretty good margins. So Goodyear wanted to get in on the truck tire side of the business, which is, I mean they have theirs but they’re not as well-known, they’re not as well respected. And it’s just really good business to buy because it makes a lot of money.
Also North America is obviously where a lot of this is taking place. Goodyear’s headquartered in Akron, Findlay where Cooper is headquartered. What Cooper has that Goodyear has differences in is China. So Cooper has two plants in China, and they make a lot tires and sell a lot of tires over there. And they ship them all over the world from there because it’s a low cost manufacturer, and Goodyear wanted access to that as well. So they get a couple benefits from that. So how did the stock prices perform Josh?
Josh Robb:
Well like I mentioned, it’s a good year.
Austin Wilson:
It’s a good year.
Josh Robb:
It’s a good day.
Austin Wilson:
It’s a good day, yeah.
Josh Robb:
So you mentioned $2.8 billion was the deal, and how that breaks down is there’s a number of shares out there in the market. And your price per share, when you add all those up, that’s what we call the market cap. So that’s the worth or the value of the company. So if you have 100 shares and they’re trading for $5 a piece, that’s a $500 market cap. That’s just rough, like that’s how it works. So $2.8 billion deal actually meant that Goodyear is paying more than what it’s currently valued at.
Austin Wilson:
Substantially. Or than it was on Friday.
Josh Robb:
Right. And so Goodyear’s saying, hey, you’re worth $2.8 billion. We’ll buy you for that. Even though maybe they were trading for less. And in fact it ended up being about 30% less, or the trade went 30% higher than what it was priced at on Friday. So there’s a premium that they’re paying for, like you mentioned, those high margin SUV’s and truck tires, there’s the exposure international. So they’re paying a premium. And so for Cooper Tire, if you own those stock shares you’re getting a benefit. They’re saying, hey, these shares are actually worth higher than they’re trading for right now. So what we saw today was the stock price went up.
Austin Wilson:
Yeah. Or essentially they’re worth more to Cooper than they are to the market.
Josh Robb:
Yes, right.
Austin Wilson:
They’re worth more to Goodyear than they were on Friday in the market by about 30%.
Josh Robb:
Yes. So then the market reacts and moves it up. Saying, okay, if you’re willing to play this then the price will rise.
Austin Wilson:
Because they’re pretty close now trading to where the actual execution price is. So it’s not actually uncommon for acquisitions.
Josh Robb:
Right.
Austin Wilson:
So the buyee, the one getting a purchase, the acquiree, it generally gaps up at around to where the announced pricing will be if that’s available.
Josh Robb:
Yep. There’s a whole thing called arbitrage, it’s those differences. And long story short, if you’re going to be bought out and a company wants you, you can probably negotiate and have some sort of premium to, hey, if you want us for future business, here’s what you’re going to have to pay for. Not unusual like you said. Now also Goodyear stock is also up as well.
Austin Wilson:
And they weren’t. This morning they were now down. But now they’re up 15% or something like that.
Josh Robb:
And so part of that probably is the reaction to, as people again, this announcement happened this morning. And so people digested the news and kind of thought through it and said, okay, what is Goodyear getting this? Are they overpaying for what they’re getting? And this reaction, at least this afternoon seems to be, people are happy with this. Traders are saying, I’m willing to own Goodyear or buy more of it because I think the value long-term is worth what they’re getting. So both actually are up today, as of right now when we’re recording. And that again, just shows that both sides are happy with this deal.
[11:06] – Benefits for Goodyear
Austin Wilson:
Yeah. So to put a couple more details in there. So the deal nearly doubles Goodyear’s presence in China. And another thing it does for the Cooper branded tires that they’re hoping to make good money on is it broadens that distribution for these Cooper tires because Goodyear is a much bigger company than Cooper, and they have a network of around 2,500 retail stores in the country. So a lot more places to sell the tires, which as competitors, that would not have wanted to sell those tires. But now it’s all one company they’re going to promote them like crazy.
Josh Robb:
And especially like you said, so if I’m a Goodyear store and someone comes and says, “Hey, I got a truck, I want to put some tires on.” If you can hold these Cooper tires, which you know are a good tire and they’re real popular, you may get that sale instead of them going elsewhere looking for a different tire, so you’re happy to put them in there now.
Austin Wilson:
So I guess to note, US and China are the two largest tire markets in the world, and they account for about one third of the global industry volume. And actually if you take a step back think about, like I was talking to a friend about this today, what are the antitrust litigation potential issues with this? I think rather limited because Cooper’s not that big-
Josh Robb:
I think they’re fifth or sixth.
Austin Wilson:
Yeah, Goodyear’s a good bit bigger. But even combined they’re not going to touch the top two. And that’s actually going to benefit the United States focus of the company, especially-
Josh Robb:
So what are the top tire manufacturers?
Austin Wilson:
So number one is Bridgestone. So Bridgestone’s a Japanese company. Number two is-
Josh Robb:
Those tires, you see those a lot on like race cars and stuff.
Austin Wilson:
They’re on everything. They’re on a lot of things. Number two is Michelin, French company. Great tires.
Josh Robb:
The tire guy.
Austin Wilson:
Yeah, that looks like the Michelin man kind of.
Josh Robb:
Looks like the Stay Puff guy.
Austin Wilson:
That’s what I was, yeah. I was like, he looks like the Michelin man, how else do you describe that?
Josh Robb:
The giant marshmallow guy in Ghostbusters.
Austin Wilson:
And I think there’s some other, like Hankook is getting up there in terms of market cap, but I think that Goodyear’s probably in the three, four range from… So anyway, even with Cooper they’re still not going to be the number one or two in the world. So yeah, that’s kind of a little bit of perspective there. Another benefit is that Cooper hasn’t really broke into the OEM tire business, original equipment manufacturer tire business, as much as they would have wanted. It’s very hard.
Josh Robb:
That means when I go to the dealership the tires that are on there-
Austin Wilson:
Correct. Yeah, so you go buy a brand new Jeep, and the tires that are on your Jeep when it’s new is the OEM tire. And a lot of people, you know what they do?
Josh Robb:
They want the same tire.
Austin Wilson:
Yeah. They drive their car, it’s great. They need new tires, they go to the dealer and they say, “I want the exact same tires.” So it’s kind of like a revolving business, which is why it’s a very lucrative business to get into. But Cooper, because of some of the, it’s very hard to get those deals. And you have to have a lot of volume and some very specific supply chain and manufacturing operations to meet these certain demands, and it was hard to get into. They had gotten into a couple, I think with Mercedes actually Cooper did, but it’s really hard to break into it.
But if you look at Goodyear, Goodyear’s come on all kinds of vehicles, especially here in the States that we’re seeing. So that’s a benefit that they’re going to be able to have is, hey, now this is our company. We can kind of tweak some of these manufacturing operations or whatever, and let’s throw these Coopers on these OEM vehicles. It’s going to be great.
So obviously 2020 was rough. People, especially early in the year, unemployed, not buying tires, not buying cars. But as the year wore on that flipped. The light switch flipped, there was a lot of money in the economy all of the sudden. And if you had a job you’re going and buying all kinds of stuff. So tire prices went up, tire manufacturer stock prices went up, and Cooper’s trailing one-year return, and this is before COVID even, over 100% as of today. And sure you’re getting a good premium today, but before that it was still like 80%. So the stock price was very strong there, and we’re expecting continued strength of that boom, in terms of people buying cars, buying tires to continue here in 2021. As people go out, the economies continue to re-open and do those things, it’s going to be great. More stimulus is going to be good for people buying tires. I think everyone’s going to win in that.
So there are some more benefits to Cooper being purchased by Goodyear in terms of cost savings for the combined company, so those are called synergies. And within two years after the deal closes Goodyear expects around $165 million in savings, which is a lot. So Goodyear shareholders are going to own about 84% of the combined company, Cooper shareholders are going to then own the remaining 16%. So it’s going to be through stock a lot of it, but it’s also going to be through cash and even debt financing. And here’s the kicker, the company’s headquarters for the combined entity is going to not be in Findlay, Ohio, which it shouldn’t be that surprising, but it’s going to be an Akron where the main headquarters for Goodyear is. And that’s something that we’ll talk about some implications of.
Josh Robb:
Well if we go back to your history that’s where it started.
Austin Wilson:
It is, it’s homecoming.
Josh Robb:
But you’re right. Just talking from a high level, and I know we’ll get to this in a little bit, but there’s been rumors and attempts in the past for mergers or buyouts and stuff. And so for this to happen for another Ohio tire company in the US, I mean that’s probably the best scenario from that standpoint, from a historical standpoint thinking where it came from, an Ohio tire dealer being bought out by another Ohio tire dealer better than overseas or something like that I would say.
Austin Wilson:
Which was one of the things that we’ll talk about that almost happened years ago.
[17:04] – Dad Joke of the Week
Josh Robb:
All right. Well before we do that though, I got a joke for you. And since we’re talking about tires and cars.
Austin Wilson:
And we can’t use your favorite joke.
Josh Robb:
No, I can’t use my favorite joke.
Austin Wilson:
But we’re going to say it anyway.
Josh Robb:
Second favorite.
Austin Wilson:
No, we’re going to say your favorite anyway.
Josh Robb:
Okay.
Austin Wilson:
And then we’ll come back.
Josh Robb:
Why couldn’t the motorcycle make it up the hill?
Austin Wilson:
Oh, I don’t know, Josh. Why?
Josh Robb:
Because it was too tired.
Austin Wilson:
Oh, that’s funny. Hey, Cooper makes motorcycle tires through its Avon brand, and I had some of those.
Josh Robb:
Wait, isn’t that the makeup?
Austin Wilson:
I know. I always thought that when I first started, I was like, that is so funny that that is a make up brand.
Josh Robb:
Who had at first?
Austin Wilson:
Anyway, Josh, you’re your fresh dad joke.
Josh Robb:
Fresh dad joke. I just got my foot run over by a rental car.
Austin Wilson:
Okay.
Josh Robb:
It hurts. Hertz.
Austin Wilson:
H-E-R-T-Z. That’s funny.
Josh Robb:
Yeah, it’s a rental car company that’s why it’s funny.
[17:52] – The Talk in the Past
Austin Wilson:
So as Josh mentioned this has happened before, this discussion. And in fact I think it’s gotten this far and then fell apart. So in about 2012, 2013, I believe was the last takeover attempt, an Indian company called Apollo-
Josh Robb:
Yep, they did the moon landing.
Austin Wilson:
Yeah, the moon landing. Isn’t that a boxer too? Apollo Creed?
Josh Robb:
Yes.
Austin Wilson:
Okay, yeah.
Josh Robb:
Fictional.
Austin Wilson:
He’s fake?
Josh Robb:
I’m thinking he is.
Austin Wilson:
Oh, dang. Well he died in the movies.
Josh Robb:
That’s sad.
Austin Wilson:
So anyway, Indian company called Apollo bid and won to buy Cooper Tire around that time as well. And it actually fizzled out because once the deal was all struck and everyone was happy, there were some things that Apollo found out that they were not necessarily thrilled about. So that deal fell apart. And then since then, so in the years that I was there and after, there have been constant rumors floating around of someone coming in town, having meetings with executives about buying it out. And that’s been everywhere from Goodyear, to Hankook, to all kinds of companies, and it’s never really come to fruition until today again.
Josh Robb:
And again, where Cooper sat being six, fifth, six, right there, they were that kind of ideal target as they did some stuff, specialized in certain pieces. They were great add on, but they weren’t quite big enough to be the one acquiring. It was just kind of that weird spot.
[19:53] – What Does This Mean for Cooper Tire?
Austin Wilson:
They weren’t going to move up the food chain by themselves because it takes money to buy. And the what’s lower is probably stuff they didn’t want anyway, or they had already bought it. They had acquired companies like Mickey Thompson and things like that, which are smaller companies, niche companies on their own. So at this point we have every reason to believe that this deal will go through around the middle of the year this year. That is when things are looking to happen. We have no reason to believe it won’t, but that’s what everyone thought almost a decade ago now, so we’ll have to see. So Josh, let’s just have a discussion. What does this mean for Cooper and maybe the combined company in general?
Josh Robb:
Yeah. So a merged company means that, like you mentioned there’s some synergy, which I think is a funny word, anyways. But you add the benefit of a larger company with workflows and all this stuff that they’ve learned, so there’s an enhancement there. It also means though that you have redundancy. So we have a person for that job, you have a person for that job. Do we need two people for that job? I don’t know. And so there will be some adjustments along the way. And moving to Akron, Ohio means there’ll be some adjustments from that standpoint. But for the company what it means though is you now have stronger resistance to other companies outside there. Cooper by itself is not as strong as Cooper merged with another larger company.
Austin Wilson:
And for that matter Goodyear is the same way.
Josh Robb:
Goodyear’s the same way. Yeah, adding in Cooper provides that catalyst to help propel them forward in that growth.
Austin Wilson:
Exactly, yeah. And I guess so to kind of build on your financials that you were just talking about those synergies, if on paper before you mentioned those things, you just can add up income statement of Goodyear, income statement of Cooper, all things are staying the same, that is how much money will become earnings. Great. Well when you start looking at some of those puts and takes and things that actually could become more efficient, you could leverage yourself a little bit with the resources that you have. You actually should be more profitable as a larger company. And with that, what’s called mix in the tire business, is those high mixes, the what makes up what of what you’re selling. Well the more of the high margin truck tires specifically that you’re selling the higher your overall margins are going to be because you have favorable mix, and that’s something that’s going to be enhanced as well for the combined company there.
[21:46] – What Does This Mean for Findlay?
Josh Robb:
What about Findlay? I don’t think that matters for Findlay.
Austin Wilson:
Yeah. Well you know it’s still early, so we’ll put that out there. We don’t really know. And they’ve really been kind of hush hush on the details. We’re telling you everything that’s really out there right now. What we do know is, as Josh said and I had mentioned earlier, the headquarters will be moving to Akron and that will, it’s not moving actually.
Josh Robb:
That’s their headquarters.
Austin Wilson:
That is already the headquarters of Goodyear. So I would imagine that there will be, like Josh said, some adjustments in terms of the, the Cooper headquarters in Findlay probably performs a lot of the same marketing, and finance jobs, and those kinds of things that may be already duplicated elsewhere. So I don’t know for sure, but there could be some organization shuffling is what they’ll probably call it. I believe that the Findlay plant, as far as that goes, employs a couple thousand people. It’s a great provider for a lot of people.
Because they make a lot of those light truck tires, probably will continue for a while to do what it does, which is good. And it does it well. Although longer term, specifically having worked in that plant, it is the least efficient because that plant has been, it was built and then it was added on, and added on, and added on, and added on for 100 years, it’s not necessarily the most efficient process-wise. So that may change over time, but at least for now I would imagine that it’s going to remain making light truck tires and enhance the overall product.
But I think the biggest discussion that we’re going to keep an eye on in Findlay is the labor piece. And specifically for a while it’s going to be the white collar labor piece coming out of, those people coming out of the office. Because just a few months ago we had some layoffs at Marathon, and that took some people out of the Findlay workforce that were contributors to the economy in a big way. Now we’re seeing that from Cooper as well. So as a local person, obviously we want more people working and making more money, and there’s been a couple speed bumps I think in that this year. And small businesses are going to look a little bit different coming out of COVID anyway, but you throw on a couple of these things on top of it and I think that Findlay is going to look a little bit different. It’s going to have a little different vibe I think in a little bit. But a lot of these things we’re not going to know for awhile. Any other thoughts from you on that?
Josh Robb:
Yeah, I mean like you said, it’s a staple in that it provides a job, an income, a wage that for a factory work there at Cooper, it’s a good paying job. And so that’s the big worry is with the upper-level executives, whether they’re here, Akron, or what, they’ve probably figured that out. But for the average employee there that’s just part of the union going to work everyday, what will that look like for them? Like you said, there’s the hope that the plant is needed within this whole, I don’t think Goodyear can just absorb all the tire needs that Cooper was fulfilling and just fill it in their plants, but you’re right, there may be some adjustments or changes. And hopefully like you said, ideally for Findlay is that this plant continues to operate and it continues to have good, well-paying jobs.
Austin Wilson:
Yeah. And I guess for all of our listeners, maybe you’re impacted by this. This is just an opportunity to start to look at some of the things that we’ve talked about over the last 60 some episodes and see if there are some ways that you need to-
Josh Robb:
Starting with the emergency fund.
Austin Wilson:
Exactly.
[25:25] – Invest in Tires?
Josh Robb:
That’s the key is, these are the uncertainties that the emergency fund is in place for is what if I have a disruption in my income? What does that mean? And so that’s there. So finally stock price, we talked about it going up, right? We’re not going to get away from that. Stock price for Cooper and Goodyear were up. You know what I say? So is now a good time to invest? You know my answer.
Austin Wilson:
It depends.
Josh Robb:
Actually I’m going to change it today.
Austin Wilson:
Yes, always.
Josh Robb:
Tread lightly is what I’m going to say.
Austin Wilson:
Oh, stop.
Josh Robb:
See what I did?
Austin Wilson:
Tread lightly, yeah.
Josh Robb:
But it’s the same. It really does. Does it fit in your diversified portfolio? Maybe. Is there a reason to own a tire company? Are you optimistic about the industry? Then that’s fine. But just understand that this is also why we’re very hesitant about owning too much of the company you work for. Because there could be again, the stock price is up, it’s a good thing. But there could be a disruption that you’re not planning for, that if you have too much weighting in the company you work for, you may be all excited about the company, but there may be something that happens that causes your long-term plans to be disrupted.
Austin Wilson:
Right. Yeah, I think when it comes to specifically the two stocks, you’ve got Cooper stock, you’ve got Goodyear stock. Goodyear stock, being the acquirer, they are in this more on for the long run. And that is something that should the deal go through as is planned, would be maybe a better long-term thinking. Where’s the company go in five, and 10, and 20 years? Where if this deal goes through Cooper stock’s literally going to be gone.
Austin Wilson:
But what I see is looking at the stock price today, being up right at the deal price, there’s really not, there’s nowhere for the stock to go. Buying Cooper stock today is, you’re not going to have any upside. Because if you hold it through the deal you get the exercise price, which is about where it’s trading today, and maybe you got a dividend in the middle, but really nothing. Where Goodyear’s the stock that you’re going to have afterwards.
Josh Robb:
If the deal falls through the price is priced higher than what the market was valuing Cooper at, so there could be a downward.
Austin Wilson:
And I’m sure that that was what happened in ’12 and ’13 when that deal was announced as well. So I think what’s a more risky pick right now, I’d say buying Cooper at $54 a share seems to have less upside than buying Goodyear. Now I’m not saying go buy either of these stocks. Talk to your advisor, it’s different for everyone. But I would say that being where the stocks are being traded right now, actually both of them spiking pretty substantially means the entry point might not be ideal for either in the short term.
Austin Wilson:
So that is Cooper and Goodyear. We’re not making light of it, this was kind of a tough episode to do being I have a connection at Cooper, your family has a connection at Cooper, the Findlay community has a connection at Cooper, but we just thought it was pertinent to talk about in real time as this was happening. So if you have any questions don’t hesitate to reach out.
Josh Robb:
Yeah, shoot us an email, Hello@TheInvestedDads.com Again, we just know the information that’s been released. It just comes straight from publicly disseminated information, we don’t have any insider on that. But if we hear anything, if we know we, we’d love to talk to you about if you have concerns or thoughts. But again, from our standpoint the bigger picture is how can you better prepare your financial situation that these type of events don’t cause a disruption?
Austin Wilson:
As always, check out our free gift to you. It’s a brief list of eight principles of timeless investing. These are overarching investment themes meant to keep you on track to meet your long-term goals. We do not talk about tires at all, so sorry to burst your bubble there. Check it out, it’s free on our website. Josh, how can people help us grow this podcast?
Josh Robb:
Yep, make sure you subscribe. Every Thursday we release a new episode, so you’ll get that there if you subscribe. If you’re on Apple Podcasts leave us a review, it helps us rank higher so more people can find us. Like I mentioned, send us an email if you have any ideas, topics, suggestions, questions, Hello@TheInvestedDads.com. You can also get there from our website, TheInvestedDads.com if you want to. And if you know somebody that was asking questions about this merger or Cooper Tire, share this episode with them.
Austin Wilson:
All right. Well until next Thursday, have a great week.
Josh Robb:
Talk to you later.
Austin Wilson:
Bye.
Outro:
Thank you for listening to The Invested Dads Podcast. This episode has ended, but your journey towards a better financial future doesn’t have to. Head over to TheInvestedDads.com to access all the links and resources mentioned in today’s show. If you enjoyed this episode and we had a positive impact on your life, leave us a review, click subscribe, and don’t miss the next episode.
Josh Robb and Austin Wilson work for Hixon Zuercher Capital Management. All opinions expressed by Josh, Austin, or any podcast guests are solely their own opinions and do not reflect the opinions of Hixon Zuercher Capital Management. This podcast is for informational purposes only, and should not be relied upon for investment decisions. Clients of Hixon Zuercher Capital Management may maintain positions in the securities discussed in this podcast. There is no guarantee that the statements, opinions, or forecasts provided herein will prove to be correct. Past performance may not be indicative of future results. Indices are not available for direct investment. Any investor who attempts to mimic the performance of an index would incur fees and expenses, which would reduce returns. Securities investing involves risk, including the potential for loss of principle. There is no assurance that any investment plan or strategy will be successful.
