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Technology Stocks : COMS/USRX
COMS 0.001300.0%Nov 4 10:50 AM EST
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To: David Lawrence who wrote (1127)3/29/1997 2:59:00 PM
From: Wayne Lian   of 1384
 
David, the discount of usrx should indeed easyly cover any commission. In fact, commission is not the number 1 cost. That will be the spread of selling coms and again buying usrx. At this moment, usrx at 58.25, coms at 34.125, the discount is about 1.50. The spreads will eat a significant portion, maybe 50 cent p sh.

The pressure to sell coms comes not only from people taking advantage of tax sale. The arbitrateurs are hard at work as well. There are evidence for this: the short sale in coms has increased significantly. The arbs sell short coms, buy usrx. They will cover when the gap closes or when the merger takes place. This leads to a question:

Is the discount of usrx dependent on interest?

I assume that the arbs have to pay interest for the funds they use buying usrx, eventhough those funds come from the short sale of coms. Recent interest hike will make this arbitrage game more expensive and the force to close the gap is weakened. But keep in mind there are many other factors at work.

Wayne
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