Silicon Investor (SI) -- The First Internet Community

STOCKTALK

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

To: Danny who wrote (39296)	2/14/2000 6:52:00 PM
From: mr.mark	Respond to of 45548

the answer is 'a' and that's my final answer

To: Danny who wrote (39296)	2/14/2000 7:28:00 PM
From: David E. Taylor	Read Replies (4) \| Respond to of 45548

Danny: There's a simple answer to your Q, and a more complicated one. The simple answer is that when 3-com distributes PALM to COMS holders, you get to keep your 100 COMS and you are given your 150 PALM at no charge (that's "free", as in the Ameritrade ads). The complicated part is that you don't get the PALM shares until August. Until then PALM will trade on a razor thin float of 23 million shares, and is likely to get bid up to insane levels. But no-one expects COMS to trade "at par" to whatever the PALM price is ("par" = say $35 for COMS + 1.5 x PALM's price), we just all hope the eagle will drag up the elephant at least part way to the par value. Now, whatever PALM is trading at as D-Day approaches in August -- whether it be 30, 40, 50, 100 -- how do you think the then holders of the 23 million PALM will view the impending addition of 530 million new shares to the float? With nightmares of their huge profits evaporating I'd say. And how do you think the holders of COMS -- who will be hopefully sitting on some significant gains of their own -- will view this coming event? My guess is the same as the holders of PALM. The result, IMO, will be a sell off in both PALM and COMS at some point prior to D-Day. When this will occur and how much of a sell off will take place depends on a host of factors, including but not limited to the then price of PALM, the discount to "par" value at which COMS is trading, the effect of the June earnings reports for PALM and COMS, the extent of the usual (and expected) summer down draft in tech stocks generally, and whatever good or bad news happens our way specific to either PALM or COMS. There seems to be no reason to unload any COMS prior to IPO day (week of 2/28), unless the run up in COMS gets to insane levels before then. Although the present price of the PALM IPO is 14-16, the market is in the process of re-pricing the issue for Goldman et al -- at today's close of 67, the (approx) value of PALM is at 21 (allowing 35 for COMS). How much further this goes is anybody's guess. Good luck and keep your wits about you. David T.

To: Danny who wrote (39296)	2/15/2000 10:40:00 AM
From: David E. Taylor	Read Replies (1) \| Respond to of 45548

Danny: I need to revise my previous answer to your Q slightly. While the PALM shares you get on D-Day will not cost you any out of pocket $$ (i.e. they will be "free" in that sense), they will of course have a cost basis for tax purposes. The original basis of your "old" COMS will be apportioned between your "new" COMS and your PALM according to a formula that should be part of the private letter ruling 3-Com has requested from the IRS (which will not be available prior to IPO date). So your PALM will have a "cost" for tax purposes. If you're holding COMS in a tax free account, that will be irrelevant, but it's certainly a consideration if you're holding COMS in a taxable account, particularly if on D-Day, you will have been holding your COMS longer than a year. If that's the case, both the COMS and PALM will qualify for long term capital gains tax at the 20% rate, rather than short term gains taxed at ordinary income rates. Just another wrinkle in the "what to do before D-Day" decision making, since if you sell prior to D-day and you've been holding the COMS less than a year, the tax bite will be maybe twice as much as if you wait until after D-day until the 12 month anniversary comes up. In my case, I have a chunk of COMS bought in August last year for which this could be an important consideration. Nice problem to have though if everything holds together over the next few months. David T.