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Technology Stocks : Creative Computers(MALL)
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To: Clarksterh who wrote (1256)12/22/1998 7:32:00 AM
From: John Martin  Read Replies (1) of 1634
 
PS Some possible factors which could be causing the difference:

1) People believe that the spin off won't happen.
2) People believe that the spin off won't be tax free.
3) People believe that MALL will dilute their shares and hence give out less than
0.7 shares of UBID for each MALL share.
4) There aren't enough UBID shares available to short since the float is so small.
I tend to disagree with your causes. Lets look at them.

1. If the spin off doesn't happen, what does that do for MALL? It will increase their book value from $4.75 to more than $63.50. Either way, the shareholders of MALL will reap the benefit of UBIDs appreciation.

2. Let's consider how the taxes would effect the distribution:
$750M * 80% = $600M (Mall current ownership in UBID
- 28% Taxes = $432M / 10.2M shares = $42.35/share
UBID today after taxes is worth $42.35 for every share of MALL. Add to that the $10 intrinic value of MALL itself = $52.35 - $35-3/8 = $18. At this point, MALL is trading at a 50% discount.

3. MALL has no reason to dilute the shares. Their intent was layed out in the prospectus for the IPO. Changing the distribution now would leave them with MAJOR shareholder law suits.

4. This one I just don't understand - please educate me. How will shorting UBID cause MALL to be so undervalued?
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