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Non-Tech : E*Trade (NYSE:ET) -- Ignore unavailable to you. Want to Upgrade?

To: FDHIII who wrote (7236)	6/17/1999 6:46:00 PM
From: let	Read Replies (1) \| Respond to of 13953

Edify CEO stated in the CNBC interview that they hoped to close the deal in September or October. I am Not sure when the 3rd leg of the deal closes. Let

To: FDHIII who wrote (7236)	6/17/1999 7:12:00 PM
From: Nandu	Read Replies (1) \| Respond to of 13953

Is this good or bad for the stock price? I'm clueless....I'm sure many others are as well.... First of all, I am no expert. I have never actually held an arbitrage position. I have only some cursory knowledge of this topic from some stuff I read somewhere, and from watching how deals like NSCP/AOL affected the price. So take what follows as mostly worthless opinionating. The general rule is that in the short term the acquirer (EGRP) will decline in price while the acquiree (TBFC) will appreciate because of arbitrage. However, most of this activity is probably over already, so I have no idea how it will affect the price of EGRP from this point on. The risk premium will vanish as the deal gets closer to being final, but whether this will happen because EGRP declines further or because TBFC appreciates is anybody's guess. EGRP is a very volatile stock, so I would expect that other factors will have much more influence on its price than the TBFC arbitrage. If you want to play this angle, the only pure way to go about it is to short 105 EGRP against 100 TBFC long. The risks in this play are. 1) The deal falls through. 2) The deal takes too long to finalize. 3) Transaction costs. There are four transactions in this play. Can you budget for a 1/8 of a pint slippage in each transaction and still come out ahead? It has been a couple of weeks since the EGRP/TBFC deal was announced, so it is reasonable to assume that the market place has already evaluated the above risks to be worth a 10% discount. Alternately, if you had already decided to go long EGRP, you could go long TBFC instead as a proxy. just make sure you analyze the risks carefully before taking the plunge. If you are already long EGRP, and have a good profit, forget about this play. You will pay Uncle Sam more than you will make up in the arbitrage. On the other hand, if you are long EGRP at a loss and want to hold on to it, you may want to consider selling it and buying TBFC, as a way to book some tax losses without losing your position or being snagged by the wash sale rule. Analyze the risks and consult your tax adviser before doing it, though.