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Technology Stocks : Cascade Communications (CSCC)
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To: Neil_L who wrote (3188)3/31/1997 1:18:00 AM
From: John Grandy   of 3743
 
hello everyone, the key to understanding this merger is NOT to look at CSCC 's missed numbers, directly.

the key is to look at the value of the combined enterprise going forward and to look at ASND's still inflated currency. a share-ratio deal states nothing more than the percentages of the combined enterprise of which each original company will constitute. it does not definitively state how much anyone is paying for anyone else, neither in real-world $ , nor fantasy-stock-world $.

if the market believes (in short term) that cscc should consist of a smaller % of the combined enterprise than .7 represents , then it will punish the prices of both asnd and cscc (=.7 asnd) --> effectively equilibrating at a value the market feels fair for the combined enterprise.

the .7 ratio CAN NOT be changed by stock market action, and the % composition of the combined enterprise CAN NOT be changed by stock market action.

all stock market action can do is rule on whether ASND made a smart move for their shareholders or not, by affecting the valuation of the combined enterprise.

[ NOTE some opposite-direction risk adjustment for the possibility of the deal not going through will emerge in the pricings; and some premium will given to CSCC for possible bidding war will probably also emerge in its pricing ]
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