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 : Concurrent Computer (CCUR) -- Ignore unavailable to you. Want to Upgrade?

To: robert a belfer who wrote (3805)	5/20/1998 10:22:00 PM
From: ENOTS	Respond to of 21143

Well, I was pleased with this deal....seems as if all the ducks are lined up, now to just push ahead and watch this little sob go!

To: robert a belfer who wrote (3805)	5/20/1998 10:24:00 PM
From: DEER HUNTER	Read Replies (1) \| Respond to of 21143

Robert...can you explain what you meant concerning arb'ing 15% by shorting. How would this be accomplished exactly. Thanks. DH

To: robert a belfer who wrote (3805)	5/20/1998 10:30:00 PM
From: skycapten	Respond to of 21143

Gee Robert, Try Yahoo CCUR board, plenty of contrary posts there. May be more to your liking. Of course, they're mostly negative hypesters. Me, I thought this board was sounding about right. The information and exchange of ideas here is the ideal that most others envy. My only regret is that I don't have enough technical information to be of any assistance in that realm. Today's news was perfect in my opinion. Since it was not an IMMEDIATE CASH CONTRACT the lemmings sold off and moved on. I hope there are a few more left so I can get a tad more tomorrow or Thursday. Those who laugh last.....

To: robert a belfer who wrote (3805)	5/21/1998 11:21:00 AM
From: Goodboy	Read Replies (2) \| Respond to of 21143

I am not sure what you mean by an ARBITRAGE profit. The technical layman definition is the simultaneous execution of multiple transactions in order to lock in a RISKLESS gain. A simple example: Stock A is a holding company for two subsidiary companies (Stocks B and C). Stock A owns 1 share each of B and C for each of its shares and has no other assets or liabilities. Stock A trades at $10 share. If there is no arbitrage, Stocks B and C should be worth $10 in total. If Stocks B & C currently trade at $12 combined, one could buy Stock A and short Stocks B and C for a $2 arbitrage profit. In this case, there is a riskless profit of $2 no matter how Stocks A,B, and C change in price. As you correctly point out, there are a number of practical considerations such as bid/offer which may or may not make an arbitrage possible in real life. For example, closed end mutual funds often trade at a discount to the stocks they hold, but arbitrage is not practical due to transaction costs and replication problems. In the case of CCUR, the only "15% arbitrage" I can possibly see you refering to is the fact that SFA is getting warrants struck at $5 when the stock is trading at $4.25 (this is a 15% discount to the $5 warrant price). This is NOT an arbitrage situation. The warrants given to SFA only give them the right to BUY shares at $5. This means they have to pay for them. SFA will only make money on these warrants if CCUR's stock starts to trade above $5 per share. SFA's profit will be a function of how much CCUR is above $5. With CCUR at $4.25 there is NO RISKLESS GAIN that can be locked in by SFA. If and when the stock goes above $5, SFA has the option to exercise the calls and then sell the stock for a gain. This does not mean that the warrants have no current value. Because SFA has an option that costs them nothing and will appreciate as CCUR goes above $5, it has a theoretical value. Options trade on many large cap stocks and are actively bought and sold. In CCUR's case, there is no market. However, a theoretical value can be assigned based on standard option pricing and according to various accounting guidelines (also used for executive stock options). CCUR is indicating this value to be about $3 million and is appropriately taking the charge. For shareholder's, the real risk is that by exercising the warrants, SFA will DILUTE our ownership position. For example, if SFA exerises the warrants, our position will be diluted by approximately 4% (2/50). If this happens when CCUR goes to $10 per share, the stock should adjust by about $0.40 to account for this (4%x10). In practice, the market is more efficient and will account for SFA's warrants as CCUR's stock price increases. In any case, one must trade-off the potential dilution affect of warrants against the added value provided by SFA. In my example, if SFA helps add an extra $0.40 per share to my value because of their earnings contributions created through owning the warrants, I am neutral to issuing warrants. In SFA's case, I think they are critical to the potential opportunity that CCUR has to go to $10 or more. As such, I am not against incenting SFA to help us get to $10 and, if we do, share a little of the profit we will all realize. This was a smart business move on the part of CCUR.