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Strategies & Market Trends : VOLTAIRE'S PORCH-MODERATED

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To: Voltaire who wrote (27104)	12/22/2000 6:45:18 PM
From: CAtechTrader	Read Replies (5) of 65232

Tom, just got a late call from a very good friend who always gets the inside skinny. He said the DB-Alex Brown downgrade and subsequent "warning" rumor was aiding a abetting a huge hedge fund arbitrage on the closing of the JDSU-SDLI deal. As you know each share of SDLI shall become 3.8 shares of JDSU. Thus, the arbitraguer buys SDLI at a discount and sells JDSU at a premium, locking in a risk free return on the difference if the deal closes. Anyway, BEFORE the downgrade right at Noon EST several large hedge funds sold JDSU short big time...then imagine...BEFORE they could do the SDLI buy-side...what a coincidence DBAB "downgrades" DURING THE TRADING SESSION, an almost UNHEARD OF PRACTICE!...oh joy! What a deal...now they can buy the SDLI side even cheaper and lock in 20% more annualized return on the deal than they could have if they had executed buy-side and sell-side simultaneously, which is the usual practice. The volume today in JDSU and SDLI belies this fact 64 million in JDSU and 12 million in SDLI are volumes way too high for position trades on the last day of trading before Christmas. This is the type of huge volume an arbitrage can create. The costs of financing an arbitrage being tremendously lower than an outright position. The hedgies got their boy James Crammer to whip on JDSU at the same time. Imagine that Tom? Risk free return on the backs of unknowing investors. DBAB happy to take the hit to its' analysts' rep. as they insure huge commission flows in this deal alone as well as future gratuities for providing such a huge risk free return for the funds. Funds that needed such a return to salvage a bad year. Can you imagine this happening Tom? The Houses really would not do this now would they?

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