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Technology Stocks : Safeguard Scientifics SFE

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To: michael r potter who wrote (1482)	7/6/1998 11:02:00 PM
From: David Lawrence	Read Replies (1) of 4467

>>That means that the market is assigning roughly a 50/50 chance of it happening. There are a lot of arbitrage forces at work, and I won't proclaim to understand all of them even after experiencing both sides of an acquisition on numerous occasions. As a matter of fact, market prices tend to go in the opposite direction that I typically expect. Suffice it to say that a great deal of the spread can be attributed to hedge positions, where shareholders of one company have shorted the other, or existing shorts have taken a long hedge position. There are also private hedge positions that are not listed as CBOE open interest or exchange short positions. While certainly some of the spread is attributable to the possibility of the deal not going through, that's pretty unlikely in this case (no major regulatory hurdles), so the discount would be relatively minor. Just a guess here, but I'd say both issues will begin to drop as the merger date approaches and the various arbitrage and hedge positions unwind. BTW, is the exchange ratio fixed, or it based on a pre-closing trading range?

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