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Technology Stocks : 3Com Corporation (COMS) -- Ignore unavailable to you. Want to Upgrade?

To: KyrosL who wrote (36450)	11/21/1999 7:15:00 AM
From: Tim McGee	Read Replies (2) \| Respond to of 45548

This doesn't answer your question directly but it should give you an idea of my line of thinking. If I could, I would like to exchange all my COMS shares for PALM shares at the IPO price. For example, If I own $100K worth of COMS, I want to trade it for $100K of PALM on Day 1 of the IPO. Under the current plan, only the fat cat investors with close relationships with the underwriters will be able to buy PALM in any reasonable quantity and they will benefit from the huge run-up that will happen when the IPO hits. If I (or you) are lucky, we'll get 100 shares of PALM at IPO. I estimate the IPO will go out at $50 resulting in a $5B market cap. The market will quickly take this to $30B IMHO and there will be lots of money made by people lucky enough to get on the ground floor of the IPO. Unlike many on this thread, I believe that the pure PALM play will dramatically outperform holding COMS for the 6 months currently planned. The current plan forces me to accept how the market values 3Com minus PALM for 6 months. The market will price its expectations for COMS minus PALM into the COMS shares over this 6 month period and they will not track the performance of PALM in step. There will be upward movement in the price of COMS but a 50% gain in PALM will not result in a .8*50% gain for COMS - it will be lower. This happens in many other situations (Example: Rite Aid owns 50% of Drugstore.com and has zero benefit in its stock price). The pure play is always better - this is also why media companies like tracking stocks. Tracking stocks allow a pure play on some product line or asset. If you accept the above as true, the conversion rate will affect how much a COMS holder makes. A lower conversion rate yields a lower rate of return vs the person who is able to buy PALM at the IPO price. Right now, I expect a conversion rate between .20 and .25 shares of PALM for each share of COMS. The underwriters and mgmt will want to keep the float thin to drive the price way up on the market. If I own 1000 shares of COMS, then I get 200-250 shares of PALM. I'd rather own as many shares of PALM as possible and leave behind my COMS shares. IMHO, PALM Market Cap will exceed COMS market cap on the 1st day of trading. So it will seem odd that holding a share of COMS with a 12-15B market cap, gives me only .2 shares of a company with an equal market cap. The net-net is that a spin-off allows me to do what I want with my money in January not have to wait till June and get penalized by what the market thinks of COMS future minus PALM. Of course, a buyout of the remaining COMS parts solves this problem just nicely from my POV. Tim