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Strategies & Market Trends : Arbitrage Plays
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To: Mark Davis who wrote (299)3/17/2001 6:38:47 PM
From: Keith J  Read Replies (1) of 376
 
I'm not positive about that acceleration event either, but my read is that if the true conversion value of RPS (not the market value) is less than $4, they can close things that day. That would put SUNW below $13.58 for that to occur.

The exchange factor as far as I can tell should be 0.07366*4=0.29464 shares of SUNW for each share of RPS (SUNW has had 2 2-1 splits since these were issued), on the assumption that SUNW doesn't get above $44.14 by May 25th. That would mean it takes about 3.39 shares of RPS to get a share of SUNW.

I also think you still get about a 10 cent dividend on RPS in May yet too. That would make it about a $479 profit before commissions and interest for 100 SUNW short and 339 RPS long based on buying RPS at 4.05 which is not likely. Probably 4.2 or 4.25 would be better to use - so say 4.25, leading to about a $411 profit on a gross investment of about $3260. Not too bad for less than 3 months if all goes as I see it.

KJ
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