<< i.e.-the day the LMNE shares are actually distributed, if MRVC starts trading minus their LMNE stake even before the mkt opens, i for one will be very irritated....>>
mact, I am not sure exactly what you are saying here. There is no free lunch. Look at it this way.
The last time that MRVC trades in the market PRIOR to the actual distribution of LMNE shares to its stockholders, it will trade at the price that the market determines to be:
1. Value of LMNE shares to be distributed: (knowable $ amt)
2. plus: current market value of remaining company, ex distribution.
At the instant that a buyer of MRVC is no longer entitled to get any shares of LMNE in a distribution, the market price of MRVC will be ONLY #2: e.g. the value of #1 is no longer contained in the price, because the NEW MRVC no longer has any LMNE component in its price.
To take an example, suppose that the distribution is to be effective at market close on a Tuesday; all stockholders of MRVC as of Tuesday close are entitled to their pro-rata share of LMNE stock. Lets say, MRVC is trading at $60 as of Tuesday close, and the value of LMNE stock that they will receive is $48. In other words, the market assessment is that MRVC, LESS LMNE, is worth exactly $12.
When MRVC opens for trading on Wednesday, IT WILL OPEN AT $12. (Plus or minus minor fractional differences due to arbitrage, or whatever.) Holders of MRVC as of the previous days close now own $48 worth of LMNE, and $12 worth of MRVC. It can't be any other way.
Now, the minute that both stocks trade openly, the market assessment of BOTH companies will start to change, and either or both may go up or down, independently, with no price linkage connecting them. By the close, the REST of MRVC could be worth 6 or 8, or 20. Or any other price.
And of course, MRVC option symbols will be adjusted to account for the fact that call buyers no longer will be entitled to any LMNE shares.
The COMS market price when PALM distribution took place is indeed an exact analogy.
BP |
