An Interesting Arbitrage Opportunity
McData Class A (MCDTA)
McData Class B (MCDT)
McData's class A shares are *exactly the same* as their class B
shares with the exception that they have *10x the voting power*
of the later. How much more expensive do you think the A shares
are?
They're not more expensive but actually cheaper! For some
inexplicable reason, they trade about $5 less than their
counterparts. If either of these classes should command a
premium, it should obviously be the class A shares.
It's certainly possible that this price differential will
continue to exist. However, if you were inclined to bet against
this irrationality, you could short the B shares and buy an equal
number of A shares. You might not make any money but it would be
impossible for you to lose any either.
What I find *incredibly interesting* about this situation is the
fact that a large institution hasn't taken advantage of it. You
and I aren't going to be able to move the market in McData - but
an institution could.
Barrons, May 28, 2001, page 38, Mark Veverka.
barrons.com
The above was originally published in Wall Street Harvest (June
7, 2001).
Cheers,
Gregg Terry
Publisher/Editor of Wall Street Harvest |
