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Strategies & Market Trends : A.I.M Users Group Bulletin Board -- Ignore unavailable to you. Want to Upgrade?

To: Steve Grabczyk who wrote (12013)	7/8/2000 8:03:38 PM
From: Bernie Goldberg	Read Replies (1) \| Respond to of 18929

Hi, Assuming you don't sell any COMS between now and then, for your 319 shares of COMS you will receive 477 shares of PALM. After the spinoff is completed it is not a given that PALM will decrease in price. It is a pretty safe bet that COMS will. Take a look at GM and GMH to see a similar situation. There are a couple of things you can do. You could sell the 477 shares of Palm that you receive and add that to your Cash Reserve for COMS. Some people are expecting COMS to drop as low as 15 or so. This would call for a large purchase of stock to satisfy AIM. My PC with COMS is 21778. Assuming that I have the same # of shares as I now have and a price of $15 I would get a buy recommendation of 968 shares of COMS ($14,518). At a ratio of 1.5 to 1 I would have 660 shares of PALM. At todays price of 31 1/16 I would get $20,500 for them giving me roughly a $600 profit after the sale of PALM and purchase of COMS. Alternative #2 Simply combine the new 477 shares of PALM with the 319 shares of COMS and make a mini-fund. You could determine the average price per share as Mr. L. recommends in his book. Tom also has explained how to do it at his website. Alternative #3 Your PALM shares will probably end up being worth more than your COMS shares. You could sell all of the COMS shares, go into Newport's maintenance section, fix the price to the price of PALM and change the number of shares to 477. IMO you wouldn't change PC in any of the above alternatives. Portfolio Control should only be changed when you change the amount of $$ you want to have at risk. For example with a Vealie. AIM wants you to sell some shares but you don't want to sell. What AIM is saying is that you should be reducing your risk. By not doing this you are increasing the risk that AIM wants you to have. If you were to buy more shares you would be increasing your risk. To maintain the integrity of the AIM program you tell it you are buying the shares by increasing the PC. The 321 shares of PALM or the 15795PC that you own don't enter into the equation because nothing is going to happen to them. You could add the 477 new PALM shares to the 321 you already own. Let's say the price of PALM on spin-off day is $30. 30477=14310. Go to your PALM page in Newport. Use the Add Shares Function. Add 477 shares at 30. Newport will take care of the math on PC*. What it will do is to add 14310 to the PC that you already have. I'm not sure as I haven't worked it out yet, but it makes sense to me that if you are adding 14310 to the money at risk in PALM you should remove 14310 from the money at risk in COMS. You do this by simply subtracting 14310 from your COMS PC. The more I look at this alternative the more sense it makes to me. Since I don't own any PALM I would start a new AIM program with PALM. The starting PC would naturally be the value of the shares on the day one. Actually this amount would have come out of COMS. To make the COMS PC correct I would subtract this amount from the COMS PC. Hope this helps. Thanks for the question. It has forced me to do a little more thinking on the problem. I was kind of hoping to get some help from Tom as he has probably gone through something like this already. Bernie

To: Steve Grabczyk who wrote (12013)	7/8/2000 8:17:59 PM
From: Bernie Goldberg	Respond to of 18929

Hello again, Everything that I told you in my last post is purely academic as far as I am concerned. On the 27th of July I am going to be in the middle of Alaska. I don't think I will have access to a computer so any decisions will have to be held off until August 6th which is a Sunday. Hopefully I will be able to make up my mind by then. Bernie

To: Steve Grabczyk who wrote (12013)	7/9/2000 7:43:15 AM
From: Bernie Goldberg	Read Replies (1) \| Respond to of 18929

Hello Steve, Just got a wild and crazy idea for your PALM situation. You have 321 shares of Palm most of which you bought on the day of its IPO. that would mean that you paid more than $38 per share for them. The shares you will be receiving from COMS on the 27th will be on a tax free basis. You could sell the 321 shares of PALM that you now own which would give you a substantial loss for the year that you could use against any gains you might have this year. Also when you get your 477 shares you would have increased your PALM holdings by 48%. I'm no accountant but you might want to run this scheme past your CPA to see if this is a valid idea. Bernie

To: Steve Grabczyk who wrote (12013)	7/11/2000 10:27:20 AM
From: Bernie Goldberg	Read Replies (1) \| Respond to of 18929

Hi Steve, Here is yet another outlook on the COMS to PALM spinoff OptionsWatch 3Com bulls are running Front month call interest peaks ahead of spinoff By Jody Brennan, CBS MarketWatch.com Last Update: 7:55 PM ET Jul 10, 2000 NewsWatch Latest headlines SAN FRANCISCO (CBS.MW) -- Options traders have turned especially bullish on 3Com in the last few trading days, as the company prepares to distribute its remaining holdings of Palm to shareholders . Since last week, market makers in 3Com have been raising volatility in out-of-the-money calls, from the mid-60s last week to about 70 on Monday, which means that options traders are interested in buying. Most popular Monday were any front month calls under $2 -- cheap July 60s, 65s and 70s. Calls give the holder the right, but not the obligation, to buy the underlying security at the specified price. Because shares of 3Com are currently trading under 56, calls giving holders the right to buy the stock at 60 or more are "out of the money." Recent action suggests that traders obviously think that currently 3Com (COMS: news, msgs) is undervalued. The stock fell 15/16 to close at 55 7/8 Monday. On Tuesday 3Com will establish the ratio of Palm (PALM: news, msgs) shares to be distributed per 3Com share. The distribution will be made to shareholders on record as of July 27. Palm, a unit of 3Com that makes popular hand-held computing devices, went public earlier this year in a widely anticipated IPO. The parent company said it would distribute its remaining holdings as part of a restructuring plan. In June 3Com posted a fiscal-fourth-quarter loss of 42 cents a share, but that didn't chase away many long-term bulls on Wall Street. "The quarter was a little better than what people expected," said Chris Sessing, an analyst with Los Angeles-based Crowell Weeden. "They're taking one step back to take two steps forward. Instead of being a larger, more stagnant company, they'll be a smaller one with higher growth prospects." Because so few shares of Palm are available, options traders are having difficulty borrowing shares to hedge "short put" or "long call" positions by selling stock. This causes the 3Com puts to be more expensive than the calls, which is unusual. See earlier story That hard-to-borrow status will disappear after July 27. But the when-issued contracts -- which represent Palmless, 3Com shares - have opened yet another chapter for options traders looking to make money on the companies' divorce. Pre-traded "when issued" contracts (symbol COMSV), or "when when issued" contracts, have already started trading over-the-counter and the market is now pricing these contracts at around 13 3/8. However, based on the current price of 3Com and Palm, these 3Com shares (or when issued contracts) are being priced at around 10 3/8 a share, or about $3 less. Although Palm stock is hard to borrow, traders could buy 3Com (COMS: news, msgs) stock, sell 1.5 shares of Palm stock and sell 1 COMSV contract. If this is the case, then traders should be able to lock in nearly $3 every time the arbitrage is made. Stumped? So are a lot of other people, so here's how it works, including the calculations. 3Com will spin-off the remaining 532 million Palm shares it owns (or about 94.2 percent of the outstanding common stock of Palm) in late July. Palm traded recently at 30 5/16, which puts its market capitalization at around $17.3 billion. Since there are 1.5 shares of Palm for every share of 3Com, the value of Palm for every share of 3Com is now about 45 1/2. 3Com recently traded at 55 7/8, and if you subtract this 45 1/2 valuation, you see that the market is pricing Palmless 3Com at about 10 3/8. Trading of the when-issued contracts is open to everyone and the over-the-counter contracts will have the same privileges as those formally listed by Nasdaq Tuesday. Also, all COMSV contracts will settle in the same bucket; the settlement date to be determined by Nasdaq. 3Com closed down 15/16 to 55 7/8. Palm shares were skimmed to 30 5/16. Hope this helps Bernie