Addi, yes I noticed that Friday during the day that USR was no longer at a 1.75:1 to COMS. Here's my guesses:
First off, they are still two separate stocks, and it is the free market. So if the MM's are getting more sellers than buyers, they are forced to lower the bid/ask, otherwise they end up with extra inventory that they will loose money selling on when/if the stock continues to drop.
This is not to say the MM's don't do speculating themselves. I know for a fact that Schwab's MM Mayer & Schweitzer lost a bunch of money speculating on shares of that little finger print identifier company last summmer (I can't remember the name, but it holds the record for Nasdaq daily volume, like 151M shrs in one day, since de-listed). I asked my broker about this as it was listed in the WSJ, and she told me that each trader at Mayer & Schweitzer is given a certain $ amount to speculate with on behalf of the company.
As to why USRX got below the 1.75 ratio, one guess may be that arbitragers and other speculative traders are looking at COMS and seeing it fall at a fairly dramatic pace. If you look at the chart, it looks like its in free-fall. People know that the ratio can't get too far from 1.75 to 1, so it could be that arbitragers were shorting USRX on Friday, knowing that it can't get too far from COMS on the 1.75 ratio. I would say that the arbitragers are just a little ahead of themselves. As soon as COMS halts it's decent, then we may see the ratio go in the favor of USRX as these arbitrage traders start short-covering.
This is purely guessing, but I don't think this small difference of 1.685 to 1 vs 1.75 to 1 has anything to do with deeper discontentment at one company or the other.
DK |
