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Technology Stocks : Seagate Technology - Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: MikeM54321 who wrote (1851)	5/25/2000 1:00:00 PM
From: Mark Madden	Read Replies (1) \| Respond to of 1989

How will the institutional investors vote? My guess is they will use complex formulas at the last minute to answer a question that approximates - Is the speculative value of SEG without VRTS minus $5 worth more than 1/8 the market value of VRTS? I do not know any institutional investors or even anyone that works for an institutional investor but here are some of my assumptions about fund managers. - They have a proven record of successful long-term investments - The develop evaluation programs that constantly change with input from world wide financial indicators - They are experts at evaluating risk over time and applying it to return on investments - They are quite focused on maximizing return on their portfolio(s) - They look long term but high risks could destroy present value At the time of their vote they will know the market value of VRTS but they will also need to determine the speculative value of SEG to make their decision. This process may be something like this except 100 times more complex - They may determine that SEG will be earning $3.00 per share three years from now and they will command a PE of 12. The $36 value 3 years from now may have a risk and time adjusted present value of $21. This would be the speculative value of SEG. In this scenario if VRTS is greater $128 per share at the time of vote the institutions would vote yes. This is because the deal gets the value of VRTS at a 15% premium to VRTS instead of a 40% premium to the taxman. This saves them 25% the value of VRTS. Since their SEG shares are exchanged about 2 for 1, they would get about half the 25% gain for each share of SEG or about 1/8 the VRTS market value. They also get about $5 for the deal which comes to a $21 gain (1/8 * $128 + $5) over having SEG stock and an after tax gain of VRTS stock value. If this formula was correct, the speculative value of SEG without VRTS is the big factor. If the SEG speculative value were $30, VRTS would need to be $200 to command a yes vote. If the SEG speculative value were $20, VRTS would need to be $120 to command a yes vote. If the SEG speculative value is $8.50 like the $2 billion indicates, VRTS only needs to be $28 per share to command a yes vote. I do not expect the institutional investors will do anything near this simple but I expect they will have a method to make their decision when the time comes. This may be why they are not speaking out yet. Does anyone have some other ideas how this vote will be looked at by institutional investors? Regards, Mark