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Strategies & Market Trends : A.I.M Users Group Bulletin Board

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To: Steve Grabczyk who wrote (12013)	7/8/2000 8:03:38 PM
From: Bernie Goldberg	Read Replies (1) of 18929

Hi, Assuming you don't sell any COMS between now and then, for your 319 shares of COMS you will receive 477 shares of PALM. After the spinoff is completed it is not a given that PALM will decrease in price. It is a pretty safe bet that COMS will. Take a look at GM and GMH to see a similar situation. There are a couple of things you can do. You could sell the 477 shares of Palm that you receive and add that to your Cash Reserve for COMS. Some people are expecting COMS to drop as low as 15 or so. This would call for a large purchase of stock to satisfy AIM. My PC with COMS is 21778. Assuming that I have the same # of shares as I now have and a price of $15 I would get a buy recommendation of 968 shares of COMS ($14,518). At a ratio of 1.5 to 1 I would have 660 shares of PALM. At todays price of 31 1/16 I would get $20,500 for them giving me roughly a $600 profit after the sale of PALM and purchase of COMS. Alternative #2 Simply combine the new 477 shares of PALM with the 319 shares of COMS and make a mini-fund. You could determine the average price per share as Mr. L. recommends in his book. Tom also has explained how to do it at his website. Alternative #3 Your PALM shares will probably end up being worth more than your COMS shares. You could sell all of the COMS shares, go into Newport's maintenance section, fix the price to the price of PALM and change the number of shares to 477. IMO you wouldn't change PC in any of the above alternatives. Portfolio Control should only be changed when you change the amount of $$ you want to have at risk. For example with a Vealie. AIM wants you to sell some shares but you don't want to sell. What AIM is saying is that you should be reducing your risk. By not doing this you are increasing the risk that AIM wants you to have. If you were to buy more shares you would be increasing your risk. To maintain the integrity of the AIM program you tell it you are buying the shares by increasing the PC. The 321 shares of PALM or the 15795PC that you own don't enter into the equation because nothing is going to happen to them. You could add the 477 new PALM shares to the 321 you already own. Let's say the price of PALM on spin-off day is $30. 30477=14310. Go to your PALM page in Newport. Use the Add Shares Function. Add 477 shares at 30. Newport will take care of the math on PC*. What it will do is to add 14310 to the PC that you already have. I'm not sure as I haven't worked it out yet, but it makes sense to me that if you are adding 14310 to the money at risk in PALM you should remove 14310 from the money at risk in COMS. You do this by simply subtracting 14310 from your COMS PC. The more I look at this alternative the more sense it makes to me. Since I don't own any PALM I would start a new AIM program with PALM. The starting PC would naturally be the value of the shares on the day one. Actually this amount would have come out of COMS. To make the COMS PC correct I would subtract this amount from the COMS PC. Hope this helps. Thanks for the question. It has forced me to do a little more thinking on the problem. I was kind of hoping to get some help from Tom as he has probably gone through something like this already. Bernie

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