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Technology Stocks : CSCO, COMS, BAY

CSCO 73.11

+0.3%

Oct 31 9:30 AM EDT

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To: Roy S. Newman II who wrote (131)	7/1/1996 1:04:00 PM
From: Ivan Andrew	of 135

Roy-There was some discussion about the arbitrage strategies and short positions earlier in this thread. Specifically, the strategy is mentioned in post #76, and a follow up question (from me) is at post #87. I've reposted the relevant bits below. My question never got addressed, and I'm still not sure I have it figured right. Any info would be appreciated. Thanks. From Post #76: STRM has been trailing CSCO by about 1/2 point. So, big investors have been shorting CSCO and buying STRM to profit from the price differential. Short sales in CSCO went from 9M shares on 4/15 to 25M shares on 5/15. When the deal is complete, those 16M extra shorts will be bought back which could cause CSCO to spike up several points. From Post #87: I'm a little confused. If big investors are shorting CSCO and buying STRM to play the 1/2 point spread between the two, won't their shares of STRM be swapped for a like number of CSCO shares at the end of June when the merger closes? If that is the case, then they will be using their newly swapped CSCO shares to cover their short positions. It seems that, in essence, the short positions have already been covered by shares of STRM.

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