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Technology Stocks : Creative Computers(MALL)
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To: Steve Lin who wrote (780)11/28/1998 5:34:00 PM
From: RockyBalboa  Read Replies (2) of 1634
 
No, You might missed on important point why MALLs price could be roughly the same as uBID. 1.58 Mio is already the 17.7% stake.

Note the well published formula: P(MALL) = 0.71 * P (uBid) + X where
X is the value of MALL remaining business. You can assume X varying between 8 and 12. This formula, though is based on a mark-to market of the ~ 80-82% stake remaining in MALL balance.

Now, MALL owns 100% of uBid. After the IPO this part will shrink to 80-82,3% depending whether the greenshoe is alloted. That's the story here. Take the whole outstanding shares of uBID then, which are roughly 8.92 Mill multiply with 82.30% (MALL share) divide by MALLs 10.18 Mill shares multiply with uBID price, add 10 (8 to 12) and you have the MALL price.

So $56 of MALL implies roughly $65 for uBID.
uBID at $120 should mean ~$95 for MALL.
uBID at $42 therefore ~$39 for MALL.

There is one benefit, namely that an eventual and aimed distribution will be tax-free so no discount for taxation will be subtracted (in the filings is stated what is necessary, ie a >= 80% stake to be spun off besides other covenants).

C.
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