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Non-Tech : PEP -- Time to buy?
PEP 142.72-0.6%12:56 PM EST
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To: Larry Novenstern who wrote (263)9/9/1997 7:03:00 PM
From: Gary L Schultz   of 392
 
Larry,

The split will most certainly have a devaluing effect on PEP. In my veiw, setting aside investor sentiment for the sake of arguement, PEP should be 2/3 of what it is today and YUM should make up the difference. This is based on their proven ability to earn (10 billion last year for what will become YUM and 20 billion for chips and soda). However, I doubt that this will be the case.

What I expect (hope) is that PEP will recover very rapidly from its devaluation while YUM will also increase but more slowly - and probably after losing some in the beginning. If the current share price at the time of the split is to be maintained, then PEP should be around 25 per share while YUM is around 13. This is based on 38 dollars per share pre-spin. If the sum of the two parts is less than 38.00 or the price the day before the spinoff - then we have, IMO, been robbed.

If PEP opens substantially below where it is today after the split, I for one am planning to buy at least another 1000 shares. I believe that PEP will soar after the spinoff - if not immediately but within one year. I like the somewhat pureness of the play.

Who know what will actually happen - this is just my opinion and probably isn't even close to reality. I'm still upset that we shareholders only get 10% of what used to be 33% of the company!! We could take it in the shorts again - we'll have to see.

Regards,

Gary
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