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Technology Stocks : 3Com Corporation (COMS)
COMS 0.00130-23.5%Nov 7 11:47 AM EST
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To: David E. Taylor who wrote (43390)6/3/2000 3:34:00 PM
From: XBrit  Read Replies (2) of 45548
 
David, there is unfortunately a conflict of interest here.

COMS employees, including the executives, have a strong interest in COMS being as low as possible on 7/27, because that way the makeup in their unvested options will be a maximum number of new COMS shares. Taking your figure of 27M employee options from an earlier message, implies issuing about 150 Mil new shares of COMS on 7/28 if the current COMS/PALM prices remain unchanged until then. If undiluted COMS is worth $15 per share to investors, then diluted COMS would only be worth 15*350/500, or $10.50 per share. Then the executives and employees would walk away with a huge windfall, effectively stealing a big chunk of the company from other investors.

On the other hand, if management takes their duty to stockholders seriously, they should obviously implement the promised stock buyback by purchasing of COMSv shares in the open market BEFORE the repricing cutoff date of 7/28. That way COMS will move to a more reasonable price in synch with COMSv, and extreme dilution can be avoided.

I'm starting to get a bad feeling that the smart money doesn't trust management on this one. I think the low current valuation of "naked COMS" means people think that management is going to line their own pockets and screw the shareholders.
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