SI
SI
discoversearch

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor.  We ask that you disable ad blocking while on Silicon Investor in the best interests of our community.  If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.
Technology Stocks : VLSI Technology - Waiting for good news from NASDAQ !!!
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  
To: DavidG who wrote (5258)3/2/1999 10:38:00 AM
From: otter  Read Replies (2) of 6565
 
Here is a very interesting situation I see for those of us who hold long term options with VLSI:

Because the offer from Philips is a cash offer that if accepted would close quickly, it means that the options (as is the case with the stock) have no future. They won't convert to options in Philips stock. They will convert to cash at the time of the acquisition.

This condition means that the time component of VLSI options have been essentially erased. The value of a $10 option that expires next month is fundamentally the same as an option expiring in January, 2000.

IF the offer had been one where stock is involved, a portion of the time component would have been retained - thus raising the price of the option according to the amount of stock involved in the offer(versus cash) - with all due consideration for the undeniable fact that VLSI stock (and options) would then begin tracking the stock price of the offeror.

So.

1. Assuming all other things are equal, there is some chance that the price of a long term option would rise a greater percentage than its shorter term equivalent (same strike price) if any future offer began to include a stock component.

2. the price of a longer term option would fall less than its shorter term equivalent if VLSI says 'no' and shuts the door.

3. the price of a longer term option might not really fall very much at all if VLSI says 'no' but keeps the door open, thus supporting the price of VLSI stock within a point or two of its current value. (the reason is that the time value component of the option would return in full).

Right now, options are acting a lot like warrants. If you believe that some deal is going to occur and if you believe it is going to be at a price greater than the current offer - the leverage that options offer appear to remain good, and the further out the option is, the less downside risk there is.

All competing viewpoints (except flames) are of course solicited.....
Report TOU ViolationShare This Post
 Public ReplyPrvt ReplyMark as Last ReadFilePrevious 10Next 10PreviousNext  

HomeMailHotSubjectMarksPeopleMarksKeepersSettings
Terms Of UseContact UsCopyright/IP PolicyPrivacy PolicyAbout UsFAQAdvertise on SI
© 2025 Knight Sac Media.  Data provided by Twelve Data, Alpha Vantage, and CityFALCON News