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Technology Stocks : 3Com Corporation (COMS)

COMS 0.00170

0.0%

Feb 6 9:30 AM EST

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To: Daniel Simon who wrote (34131)	9/15/1999 4:30:00 PM
From: Tim McGee	Read Replies (2) of 45548

Many of these excessive valuations exist primarily due to the thin floats. JNPR is an example of what happens when a thin float expands. Only a small percentage of JNPR trades publicly. With the current PALM plan, we are talking about 100% of the company trading. This is unusual in internet-mad world right now. If any of the others you mention (ebay, yahoo and amazon), announced a significant secondary offering, their share price would shoot down. Some COMS holders will sell (many institutional investrors may bail b/c PALM may be too risky for the fund they manage). However, the primary sellers will be the IPO holders. This is why I don't like this. The IPO holders will enjoy a big run-up while the thin float exists. Then they will bail when COMS holders come in. The price of both PALM and COMS will go down the day after the transaction is complete. The only advantage this plan has is that it fills up the new PALM with some working capital. This can be addressed by doing a secondary offering after the spin off or some other traditional financing. Granted, this has some of the same affect but shareholders are not left in an unknown lockbox for 6 months while investment bankers and speculators reap all the rewards. Notice you won't find any investment bankers blasting the plan unless they have no chance of being an underwriter. Watch: JP Morgan will not underwrite and CS First Boston will lead -- and look at the comments from these two over the past few days. My argument is to spin off PALM but do it right. Just give us the shares from the beginning. I think Ericb is trying to outsmart the market here - and he is notoriously bad at that.

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