Yes, this is a fine opportunity to pick up the more valuable (voting rights) MCDTA at a substantial discount. As to why the spread is widening, it may be because of a perceived short squeeze in MCDT. But there is likely to not be any actual MCDT short squeeze price bounce, because MCDT/A arbs immediately (re)short MCDT (and buy MCDTA) the moment any MCDT short covers or gets squeezed out. Call any broker and ask if there are MCDT shares available for shorting - there aren't, and haven't been for weeks. This is likely to continue as long as the spread remains wide enough to continue to attract (new) MCDT/A arbs. A common belief is that a large short position is bullish because shorts normally have to buy back their borrowed stock. But that is not true in this case. When MCDTA and MCDT are combined, MCDT short arbs can just surrender their MCDTA to cover, without having to ever buy back their borrowed MCDT. Hence, no MCDT price bounce from the large MCDT short position is likely. Come the Nov. 1, 2002 first date on which MCDTA and MCDT can be combined into one security without jeopardizing the taxfree basis of the Feb. 7, 2001 spinoff of MCDTA from EMC, there likely won't be any spread, and you will have benefited by its elimination. The spread may well have been eliminated long before Nov. 1, 2002 if word gets out about the inherent voting superiority of MCDTA.
Richard Tauber post:
The difference between MCDT and MCDTA is now $8.37.
Do you have any ideas as to why the spread has been widening?
Appears to be an opportunity to pick up more MCDTA at a discount. Do you agree?
Thanks,
Richard |
