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Technology Stocks : IDT *(idtc) following this new issue?*
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To: Hawaii60 who wrote (13582)8/26/1999 8:02:00 AM
From: Mark Peterson CPA  Read Replies (2) of 30916
 
Hawaii60, enjoy your thoughtful analysis and the market dynamics between IDTC and NTOP. However, there is one valuation issue that appears to have been inadverdently excluded.

Shares of stock in the marketplace are traded as as a fully liquid but minority ownership interest to which no control premium is attached.

While it is not necessary to own 50.1% of a stock to warrant a control premium (because it is possible in certain circumstances for a few large shareholders with less than a 50% combined ownership interest to exert control over a widely dispersed minority ownership shareholder base, certainly IDTC's 57% ownership interest of NTOP is a majority ownership interest that, in the event of a sale of NTOP warrants a control premium.

What is that premium in this market? Studies of control premiums available through MergerStat suggest that 30% - 57% may be warranted.

By my view, IDTC's proportional ownership interest in NTOP is more properly reflected in the following manner:

$70 * 28M * 1.3 = $2.548B controlling ownership interest

$2.548B (controlling ownership interest) divided by 35M IDTC shares = $72.80 per controlling share. Naturally, that amount excludes the intrinsic value of IDTC.

However, a $22 intrinsic value of IDTC and its $72.80 controlling ownership interest in NTOP is approximately $94.80 in break-up value.

As you have so adeptly pointed out, there is certainly a disparity in the market's current valuation of IDTC and that disparity will continue to exist until NTOP's stock settles down and the results of its partnerships with AOL, Sprint, et al are more apparent.

But the control premium is a factor that I believe should not be excluded.

Best regards,

Mark A. Peterson
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