Re: OA IPO and possible spinoff.
From TheStreet.com: (Watching this unfold may offer some hints about what to expect with OA. Sounds like Metamor will spinoff some shares to shareholders, issue some new shares for the IPO and retain the remaining shares. Note that e-commerce consulting is currently a hot sector with many small companies having multi-billion dollar market caps.)
thestreet.com
<<Spinoff Players Watch Metamor Call Options
By Erin Arvedlund
Staff Reporter
12/9/99 1:15 PM ET
Spinoffs may be hot for most investors these days, but once they turn into IPOs, they're temporarily off limits to options traders, except for some who are finding a creative way to play their parent companies.
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Xpedior, an e-commerce consulting company, is about to be spun off from its parent, Metamor Worldwide (MMWW:Nasdaq), in an initial public offering scheduled for Dec. 15. Xpedior is in a roadshow this week in New York and Boston, and the company was being compared with rivals Scient (SCNT:Nasdaq) and Proxicom (PXCM:Nasdaq).
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Metamor (yeah, it sounds like a breakfast protein supplement) has zipped up 10 points since Nov. 30, quite a run in advance of the Xpedior spinoff.
The primary reason is the potential to get a piece of the spinoff. Metamor is spinning off just under 20% of Xpedior, and the remainder will go back to Metamor shareholders. "If you own one share of Metamor, you will own 1.2 to 1.3 shares of Xpedior" after the spinoff, explained Tina Larsson, an analyst with The Spinoff Report.
So, if the idea is that Xpedior's IPO is going to take off -- and Metamor with it -- why not just run out and buy a December call option, which would give you the right to purchase 100 shares of Metamor at a certain price?
Well, first thing is that the Xpedior IPO is scheduled for Dec. 15, and December options expire at the end of that same week. Second, Metamor options this week turned super-pricey. December 35 calls are up 1/4 ($25) to 4 1/8 ($412.50) just today, mostly because the implied volatility in the options suddenly shot up to the low 90s ahead of the spinoff.
Better to give yourself some time for the call-option bet to play out. "You're betting on the Xpedior spinoff exploding, so better to buy some out-of-the-money calls dated in January or even March 40 calls," theoretically priced at around 5 ($500) per contract, said one options veteran.
Holders of later-dated options won't get any Xpedior shares, but they can benefit from Metamor positions because the parent company will retain an ownership stake in Xpedior.
And though the Metamor options are expensive, "in the real world, that's not inconsistent with any other Internet issue," the trader said, adding that the play is not for the faint of heart. "I would have to watch the options day and night, and then I wouldn't sleep."
So Metamor's options are expensive, but its spinoff, Xpedior, is profitable, while peers Scient and Proxicom are not. As of Friday, Proxicom traded at 24 times its 1999 revenues. A similar multiple would put Xpedior at a trading range of $60 a share, Larsson said.>>
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