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Biotech / Medical : Biotech Derivatives

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To: LLCF who wrote (395)	9/15/1999 6:38:00 PM
From: RWReeves	Read Replies (2) of 555

We agree on point 1. On point 2. I actually mean a different case, i.e. as with any stock company, what you buy reflects the NPV of expected cash flows that would be available, generally, to an acquiring company. (For the case where the company pays no dividends or other distributions). You, as a minority shareholder can't actually get your hands on the cashflows. But the expectation that the share you hold could be sold to an acquirer and the acquirer could realize the actual cash flows would seem to be the underlying value- that's the essential function of an arbitrage market in equities. This just isn't there with a tracking stock. Let's say BTRN suddenly plummets to a nickel based on investors dumping the stock or just market downturns. Novartis, for one, could snap it up and realize the far greater inherent value of BTRN's technology. But if GZMO was selling for a nickel tomorrow who could buy it and realize the underlying value? Ass far as I can tell, nobody could legally buy it and own it. This is the arbitrage driver which I (maybe wrongly?) think is missing. I think I've taken too much "thread time" and just need to do some research on this. RWR

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