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Pastimes : The Justa & Lars Honors Bob Brinker Investment Club
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To: Andrew Vance who wrote (5121)5/13/1999 5:42:00 PM
From: Sun Tzu   of 15132
 
I have no doubt that the future is very bright for TSMC, so you don't need to sell me there <g>. But the point is that this stock is trading at 100 on one side of the ocean, and at 150 on the other side. And the free enterprise spirit being what it is, I'd say that people will buy it for 100 there and sell it for 150 here, regardless of how they feel about the future of the company. I've read the conversion limitations that you sited and it seems to me that they allow for equivalent of about 28 days worth of trading volume of TSM to be dumped on the US market each quarter, by the big long term investors. Given that more than 50% of the company is in the held by these shareholders (or so I have heard, so do verify for yourself), then this conversion overhang can go on for a long long time. I saw nothing in the arrangement to prevent the Taiwan government from dumping 20 million shares each quarter on the US market while at the same time buying the same shares back on the Taiwan exchange, thereby maintaining its investment. The same can be said for all the big shareholders.

So IMO, the only way in the long term for TSM to move higher, is for TSMC to rise by more than the current arbitration difference (give or take 10%). Then the question becomes what is your expected return on TSMC (in Taiwan) over the next 12 months? Whatever it is, I suspect TSM will move by that same percentage less 25%~45%.

I am very interested to hear what you'll find out about this conversion process.

regards,
Sun Tzu
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