market value of the IPO'd shares will likely play a large role in determining the ratio.
Ummmm, don't believe that's how it works. Distribution ratio has nothing whatsoever to do with valuation.
The total number of shares of Palm Inc will be established at the IPO. 20% of those will be sold, and 80% of them will be distributed. Each share of COMS will receive Palm shares worth 1/345,000,000th of the 80% of Palm's market cap, regardless of the number of Palm shares or the value of each Palm share on distribution day.
For example, if the IPO issues 250 million shares, then 20% or 50 million will be sold at the IPO, and the remaining 200 million will be distributed, with each COMS share receiving 200/345'ths of a share of Palm. Palm value doesn't enter into the equation, only the number of Palm shares outstanding vs the number of COMS shares outstanding.
The market value of COMS stock, after the IPO and up to distribution, will very heavily depend on the stock price/market cap of Palm. 3Com's market cap right now is about 15 billion, Palm's could well exceed that by distribution time.
- Dway |
