DG,
I explained this in a number of previous posts, but I will do so again for the "danger" of it <G>.
The final conversion ration is .928, sometime in Q1. That means you get .928 shares of JDSU for each share of OCLI you tender.
Now the ratio between the two stocks is LESS than this. This ratio is found by dividing the OCLI price by the JDSU price. Like this (as of this morning):
219.5/257 = .854
Since the ratio is .854 NOW, it has to grow to .928 by deal closure date in Q1. The difference (.928 - .854 = .074) is the arbitrage difference, or the PRICE OF THE RISK and TIME. RISK that the deal won't close or be delayed, and the TIME value of money until deal closure if all goes according to plan.
To the buyers of OCLI, this extra is risk. The risk is measured by an extra 8.66% (.074/.854) of profit. Each person has to determine if the risk of the deal going through is worth the extra that is offered for that risk. To me, you and a number of other people, the risk is worth it because we own OCLI stock and expect the deal to go smoothly and on time.
So as you know, to get the value of this additional premium, you buy OCLI and hold it until JDSU calls your shares, which you appear to be doing.
STeve |
