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Biotech / Medical : Ligand (LGND) Breakout! -- Ignore unavailable to you. Want to Upgrade?

To: Russian Bear who wrote (21363)	5/24/1998 9:38:00 PM
From: WTDEC	Read Replies (2) \| Respond to of 32384

Hello RB. Only negatives I see is lack of margin on SRGN, possible high % transaction costs to buy, time value loss to closing, and the general complexity of the deal. Needless to say, these are minor for all LGND believers in light of the upside we see. Arbs could clearly buy SRGN and LGND puts on an equivalent amount of LGND (or short LGNDor LGNDW) to hedge the LGND market risk very economically, my guess is 10-15% on an annualized basis. Their 'bet' would then only be that the advisory committee recommends ONTAK on 6/2, on which I place a probability of 80%. If recommended, the FDA approval is a 90% probability, for a compound p= 72%. So, the expected gain would be .72x.23=.1656, or 32%. If we assume payout in one year, there is a tidy profit to be had with no market risk at all. So, why does the inefficiency persist?? I think the size is simply too small for the arbs to bother with, for the most part. The available float is not great and the price so low. The negatives noted above are probably keeping most non-arbs away too. I trust you have been a buyer. I have. Regards, Walter