How high will Microsoft fly? Message Board

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Technology Stocks : How high will Microsoft fly?

MSFT 465.93

+3.3%

Jan 23 9:30 AM EST

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To: John who wrote (26291)	7/16/1999 1:16:00 PM
From: Harry Sharp	of 74651

If and when Microsoft would issue a tracking stock, and if it structured like most others, here's about what you could expect. Microsoft would determine the value the total of the divisions to be tracked much as an IPO would be valued. They will then issue about 20 percent of this total stock value to the public and collect the money. They will continue to hold the remaining 80 percent of the stock. If the 20 percent that was sold to the public skyrockets then the proportional value of Microsoft's 80 percent should push MSFT stock higher as well. Microsoft could choose to hold this tracking stock forever or more likely would spin it off (GIVE it) to existing shareholders at some point. Your options should not be affected until MSFT actually gives this 80 percent to the shareholders (likely years away). At this point MSFT stock price should drop very close to the exact value of the spin off. Say the new tracking company is worth $30 per MSFT share, then the day the 80 percent are distributed, MSFT will drop $30. MSFT shareholders will not lose anything as the $30 drop in MSFT price is offset by the $30 gain in this new stock (in actual practice the two pieces should be worth more than the whole). I don't know the exact procedure for revaluing the options but this $30 difference would be made good to the option holders. If you are holding calls either your strike price will drop or you will pick up an option on the new entity or both. Perhaps others more knowledgeable than I am could elaborate. BTW, an example of a tracking stock would be Micron Technology's (MU) computer manufacturering division: Micron Electronics (MUEI).

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