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

To: dav who wrote (41640)	3/10/2000 9:08:00 PM
From: Ricardo Villa	Respond to of 45548

Hi Everybody, It has been quite a while since my last visit to SI! The valuation disparity between COMS and PALM is very interesting. It is an arbitrage play that deserves close attention. Many have asked themselves, how can COMS be worth less than PALM if it owns 94% of PALM? The reason is that there are many uncertainties between today and D-day (the PALM share distribution day), such as: 1. Will it take place at all 2. Ratio? 3. When? 4. Tax Implications 5. Possible hurdles along the way. Anyway, the point is, that in order to track this disparity, I am putting together a "Relative Disparity Index", which basically represents the price difference of one share of COMS and what it should be worth if we take into account the valuation of PALM. In other words its roughly the amount to be gained from the "arbitrage play". As we get closer and closer to D-day the disparity should get closer and closer to 0. I have put together three scenarios. 1. Super Conservative: COMS is worthless w/o PALM 2. Moderately Conservative: COMS is worth $25 per share 3. Normal: COMS is worth $50 share. In all three cases I see great disparity. For example, in scenario 1 for March 10, COMS would have to rise $39 for the disparity to disappear. All comments are welcome. Please take a look at: geocities.com