Network Associates (NET) Message Board

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Technology Stocks : Network Associates (NET)

NET 180.34

-2.4%

Jan 29 3:59 PM EST

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To: Cyclops who wrote (3068)	8/14/1998 8:26:00 AM
From: Geoff Nunn	Read Replies (1) of 6021

Cyclops, you are way off base. Short interest has been high in NETA chiefly because of stock buyouts. In stock-for-stock mergers it is normal for short interest to arise in the acquiring firm. Arbitrageurs play the spread between the market price of the stock to be acquired (e.g. SOLLY) and the deal price. They are willing to take the risk that the deal will fall through. They don't want market-price risk. So, they acquire shares of SOLLY and short an equivalent number of shares of NETA. By shorting NETA, they hedge their position against the risk that the price of NETA (and SOLLY) will fall. They make money if the deal goes through in a timely manner, and lose if it doesn't. Now that the SOLLY acquisition has been consummated, short interest in NETA will decline. The last time I saw short interest rankings, WCOM was number one. WCOM is currently involved in a stock-for-stock buyout of MCI. You will see a sharp decline in short interest in WCOM once this merger is resolved. The shorts are not getting shot! Geoff

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