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Technology Stocks : Creative Computers(MALL)
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To: drakes353 who wrote (1126)12/4/1998 4:54:00 PM
From: Tom Hua   of 1634
 
One thing that might argue for a persistant discount even after UBID is widely shortable is the mismatch in the number of UBID shares availble (1.5 million) versus the number of MALL shares available (10.whatever).

drakes353, the arbitrage picture I envision is different. If a discount exists after 30 days then for each share of UBID shorted, the arbitrageur must buy 1.4 shares of MALL (ie., 1/0.72). There are 4.1 MM MALL shares in the float, up to 2.9 MM shares will be bought for arbitrage purposes, leaving only 30% of MALL float, or 1.2 MM shares, for non-arbitrage trading. Therefore the mismatch is not as large, effecting in a much smaller discount than was the case today.

Regards,

Tom
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