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Technology Stocks : UBID - an IPO spinoff of Creative Computers
UBID 3.0000.0%Jan 21 4:00 PM EST
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To: SHGLaw who wrote (238)12/23/1998 2:07:00 PM
From: dlc   of 581
 
The analysis on this thread showing the spread between UBID's value and MALL's value suggests a risk-free arbitrage opportunity (long MALL short UBID) once UBID becomes eligible for shorting (30 days from the Dec. 4 IPO). This isn't going to happen since it will be all but impossible to short UBID. First, the float on UBID is very small. All the people who want to play this game will find no shares to borrow. Second, and more importantly, any institutions long UBID and any brokers with retail customers paying attention to this issue will make sure their long positions are in their cash accounts, not their margin accounts, to prevent shorting. The retail customers at the discount brokers should do the same thing if they have any brains. (Most of this stuff isn't marginable anyway). The result is that UBID isn't going to be forced down by arbitrage shorts. When this fact is recognized, MALL will rise quickly to close the gap.

Finally, since MALL's ownership of UBID is (as I write this) worth about twice the value of MALL, UBID would have to fall a long, long way on long liquidation (not short sales) for the value of MALL to decline once the inability to create a risk-free arbitrage is recognized.

Buy MALL.
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