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Strategies & Market Trends : Z Best Place to Talk Stocks

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To: Joe Stocks who wrote (43532)	9/19/2002 2:45:58 PM
From: DanZ	Read Replies (1) of 53068

Joe, The spin-off won't necessarily increase the supply of RRI because Reliant Energy already owns the shares of RRI that they will give to REI Shareholders. They aren't issuing new stock, so the number of shares outstanding won't increase. Of course REI Shareholders could sell the RRI that they are given, but it is my belief that many have already done that by shorting RRI. That is one possible explanation for the significant underperformance of RRI relative to REI the last couple of months. Even if REI Shareholders don't hold most of the short position, I would think that the shorts took their positions with the spin-off in mind, and plan to cover into any selling by REI Shareholders. Last I checked the short interest was over 5 million shares, and I don't think that the stock has much downside from 3.50. I also don't see any risk that RRI won't be able to refinance their debt. What bank would be stupid enough to force a solvent company that covers their interest by 8 to 10 times into bankruptcy? Personally I think that RRI is a better buy than REI...but isn't that why you like REI better? lol

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