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Technology Stocks : 3Com Corporation (COMS)
COMS 0.001700.0%Feb 6 9:30 AM EST
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To: KyrosL who wrote (34148)9/15/1999 11:39:00 PM
From: Tim McGee  Read Replies (1) of 45548
 
The problem will be COMS will not pace directly with PALM b/c investors will value PALM's future much higher than the uncertain future faced by 3Com minus Palm.

This typically happens in a spin-off or merger. For example you can buy T right now at a discount to the market by buying Media One stock and waiting for the merger to finalize. The price difference represents the risk that the merger doesn't go thru - the market is pricing this risk.

COMS price increase will lag PALM precisely b/c, the day after COMS holders get their PALM shares, COMS is worth much less. The market will factor this into COMS price before the planned transaction date. COMS will move in the same direction as PALM but it won't move up as much as PALM does.

Note: COMS price has had no benefit from owning a good chunk of JNPR stock.

Many companies stock do not benefit from owning significant chunks of internet stocks right now -- only the pure plays get the multiple. This is why media companies like tracking stocks. Its why MSFT is talking about a tracking stock for its Internet properties.

I can't sell covered calls on PALM if i don't own it (i.e. buy it in the IPO) and I certainly don't want to sell uncovered calls (assuming options are available before COMS holder get PALM shares).

I personally don't think option trades are complicated that was not my point. But this planned transaction is complicated and WS typically does not like complicated transactions b/c they are hard to value - look at USA networks and Lycos deal.

Tim
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