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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: SiliconAlley who wrote (59911)	2/19/2016 1:26:31 PM
From: Art Bechhoefer	2 Recommendations Recommended By Bruno Cipolla david1951 Read Replies (2) \| Respond to of 60323

To all: Time will tell which of us is correct about the final price to be paid for SNDK. None of us has enough information to predict positively which alternative will ultimately prevail. But the notion that SNDK, acquired at $67 or so, plus 0.2387 shares of WDC is now worth about $78, highlights the possibility of arbitrage controlling SNDK share price more than intrinsic value (on which I based my price prediction). Even at today's current price of $68.58, one could trade on the assumption that the stock is really worth about $10 more than that. One also could sell put options with a striking price between $75 and $85, with January '17 expiration and benefit from the loss of premium as the option approaches expiration and/or the difference between the current share price and the presumably higher share price immediately prior to the close of the deal. Or, if one were less optimistic about the share price even getting back to $70, one could sell covered calls with a strike price of $70 and January '17 expiration. This would protect profits and even somewhat compensate for the loss of dividend while continuing to hold SNDK, but it would also limit profits if the shares eventually were acquired at $86.50. The only nearly guaranteed loss one could incur would be from shorting SNDK at current, or even slightly elevated levels from today's price. The lesson that remains is that SNDK has a lot more intrinsic value than is assumed by those looking solely at current earnings per share. Art