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Technology Stocks : Westell WSTL
WSTL 5.510-3.0%Nov 21 9:30 AM EST
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To: LiPolymer who wrote (18118)2/24/2000 12:42:00 PM
From: add  Read Replies (1) of 21342
 
Given the current WSTL/TLTN spread, the market is giving a 80% chance that the deal will be done. My analysis is a simple one it is not the spread difference, but simple probability theory.

Given, the WSTL price if the deal is done, the TLTN price should be 3.3 times the WSTL price. The probability of that deal is P. If the deal is not done, TLTN will be something say Y. Then we get the simple equation:

3.3*WSTL(current price)*P + Y - P*Y = TLTN(current price)

If you assume a range of say 20-40 for Y, the TLTN price if the deal doesn't go through, then we pretty much get P = 80%. P is not very sensitive in that range for Y.

So the deal with get done with a 80% probability as of this morning 9:30 PST.
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