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Strategies & Market Trends : MDA - Market Direction Analysis
SPY 672.04-1.7%Nov 13 4:00 PM EST
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To: Zeev Hed who wrote (75958)4/25/2001 6:59:40 PM
From: Haim R. Branisteanu  Read Replies (1) of 99985
 
Possible arbitrage trade (careful VSH reports earnings tomorrow)

Buy 1 share of
VSH - P/E of 8

Sell short 2 shares of
SEM - P/E of 16

Logic - SEM received an exchange buy out offer from VSH which states that VSH will issue 1 new share for every 2 shares of SEM. The board of directors of SEM rejected twice the offer from VSH. My speculation is that VSH will not overpay for SEM and as soon as the offer will be off the table SEM will slide.

This is an arbitrage transaction and it may be that another suitor will arrive and overpay for SEM and the market will not recognize VSH value.

Haim
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