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Technology Stocks : Ampex Corporation (AEXCA) -- Ignore unavailable to you. Want to Upgrade?

To: WAI who wrote (11255)	9/23/1999 10:39:00 PM
From: Carl R.	Read Replies (1) \| Respond to of 17679

I agree that it is odd that the examples I cited have persisted, but they have. The current market cap of CARI is $2.8 billion. MMGR owns 72% of it, or $2 billion. MMGR was recently formed by merging SNTC, which owned a plastics business of unknown value and CARI, with MMGR, which had a market cap of about $.9 billion. Thus assigning a value of $0 to the plastics business, the presumed combination should be worth at least $2.9 billion, yet the market cap of MMGR is just under $1.9 billion. In the other example I cited, NTOP has a market cap of $2.8 billion. IDTC which is an ISP and also owns 52% of NTOP has a market cap of $.8 billion. What sense does that make? I believe these valuations reflect the market's belief that the subs are overvalued (which they are), and that if the owning corporation attempted to sell its interest in the sub it couldn't get full value out. Nevertheless, as you point out this should be easy to arbitrage away....provided that you can short the subsidiary. I tried to make such a transaction myself, as a matter of fact, buying MMGR and trying to short CARI, but was informed that I couldn't short CARI. I'm not sure why. Note that I'm not concerned that we would get screwed in an IPO. My point is more that IPOs are currently being ridiculously overvalued, and that someone will reap the benefit of the overvaluation other than us. Clearly Ampex would ultimately receive the full benefit of the real value of iNEXTV as it grew and became profitable. My concern is just that I'd like to see the shareholders also get the benefit of some of the ridiculous valuation rather than having that benefit go to reward the underwriter's designated flip artists. Thus I believe that an IPO of iNEXTV will benefit Ampex because it will establish a high value on iNEXTV, and after the lock-up period Ampex will be able to raise some cash by selling additional shares, either by a secondary, or by registering them with the IPO. An IPO will benefit iNEXTV because it will fill it with the cash it will need to grow. The IPO will greatly benefit the flip artists who are lucky enough to be allocated shares of iNEXTV at the IPO price, and who can then sell them for an immediate profit, which is sometimes large. (MPPP went at 28, traded over 100 before coming down. Brocade went up and stayed up.) Bramson will benefit no more than the rest of us, except the the extent that he owns more shares. We don't get screwed, we just don't get the benefit of a ridiculous valuation - instead we are valued based on old fashioned notions of growth and profits, including those from iNEXT because they would be consolidated. And therefore it isn't clear that the value would be much different than it is now. Carl