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Technology Stocks : Qwest Communications (Q) (formerly QWST) -- Ignore unavailable to you. Want to Upgrade?

To: Harry J. who wrote (4845)	8/5/1999 2:47:00 PM
From: Larry Livingston	Read Replies (1) \| Respond to of 6846

Harry, I haven't checked you math but in principle it's correct. Were you to buy US West today and were the price of QWST to remain where it is by the time the deal closes, you would be picking up significantly more QWST than by an outright purchase, but remember, your assumption would in that case be that the merger is a good one and that the value of the combined companies will go up. In theory that would mean the price of QWST would trade up towards the upper end of the collar and possibly even above it, as the deal approached. Your bargain would vanish and you would have been better off with an outright purchase of QWST now. In fact the trend up would accelerate as QWST moved back through collar as every move up would be less dilutive. The same forces that drove the stock down would be in effect in reverse. But you are certainly right that US West shareholders aren't the only ones who might be interested in shorting QWST. When QWST was trading in the upper range of the collar it would have been an invitation to any arbitrageur to come in and buy US West and simultaneously short QWST, to capture the spread and have the free shot to the downside in QWST stock. You can understand why the collar was used in the deal but it may have been shortsighted, considering the incentives given to short the stock. On a more positive note now that the stock is trading below the collar the selling pressure should be lessened from a technical standpoint, assuming the fundamentals are sound.