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

To: Roads End who wrote (26929)	6/2/1998 2:03:00 PM
From: Charles Skeen	Respond to of 97611

Regarding DEC arbitrage, no need to buy back CPQ stock if one had sold 945 shares of CPQ for each 1000 shares of DEC bought. For example, on March 12, DEC sold for about 50, CPQ for about 25 3/4. The net cost of buying 1000 DEC and selling 945 CPQ would have been about $25,670. When the merger is consumated, the DEC holder gets $30,000 in cash (1000*$30/sh.) and 945 CPQ shares. He gives back the 945 CPQ shares that he borrowed and is left with a profit of $4,330 less commissions, interest costs (about $600) and fees (if any) to borrow the stock -- looks like an annualized return of 50% or so, depending on how long it takes to close the merger and whether your broker gives you credit for the proceeds from shorting the stock. Good investing. Charlie