The market makers will support the price for a period of 30 days. This is their commitment for being part of the IPO group. this means that on the open on May 29th (Monday) the stock will float on it's own. UP until that time, they buy excess stock into the mkt inventory they hold.
If you watch the daily price bid/ask, the price is fixed by the mkt makers and I suspect that they are buying all this stock back. very little trades on the sell side. If the price slowly slides all month long, there will be little left to free float in 30 days.
Avg daily volume is like 25M shares. I would estimate by watching the level II data go by that 70-80% of those are buyback trades. Given this, then in 17-22 days the entire 360M shares will have been bought back. big question is if everyone sells them back to the mkt makers, who picks up the final tab? the mkt makers or does AT&T have a commit to buy them back on the 31st day from the mkt makers? Will the mkt makers dump 360M shares on the 31st day? Not sure, but it will be very interesting to watch how the market works in this instance.
If a tracking stock goes to 0, does this mean you have a 0 valuation business behind it? Is this a vote of no confidence by the shareholders? I think there are some very interesting issues arising here for the tracking stock market. It used to be that you could issue a tracking stock and see valuation of the underlying business. UP until now almost eveyrone of these has been increasing in value and has taken off. In this case, if AWE goes down to some small number, should it reflect the valuation of the underlying business with the overall market? Hence, shouldn't that piece of AT&T have a lower valuation for purposes of assinging stock price to the parent AT&T in the future? If AWE were for instance, 25% of the total revenue of AT&T, then wouldn't the analysts discount 25% off he price of AT&T since the tracking stock for which it is tracking that valuation has gone to 0?
I am not sure what happens to AWE in the long run, but the issues involved here are unique. I am not sure what happens to AWE in the long run, but I am just supposing out loud. |
