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 : Ascend Communications (ASND) -- Ignore unavailable to you. Want to Upgrade?

To: Lutz Moeller who wrote (59000)	1/13/1999 10:02:00 AM
From: Jack Colton	Respond to of 61433

59000 went by without fanfare. Of course there is no correlation between number of posts and share price any more. OUR next thread will have to start with 80000 posts...

To: Lutz Moeller who wrote (59000)	1/13/1999 10:32:00 AM
From: Jeff Jordan	Read Replies (2) \| Respond to of 61433

Congrats! to everyone who hung it out! It's on to bigger and better things with Lucent... Jeff

To: Lutz Moeller who wrote (59000)	1/13/1999 1:27:00 PM
From: Chuzzlewit	Read Replies (3) \| Respond to of 61433

Lutz, when will these guy understand that it is pieces of paper that are being traded, not cash? And once they understand that, will they ever be able to figure out the very simple arithmetic the arbs use to place prices on the resulting pieces of paper? If company A pays a premium for the purchase of company B, then company A is worth less after the purchase than before. And if company B's value is based on company A's value it is idiotic to "value" the deal based on the price per share prior to the acquisition. So for the benefit of these guys who love to tell us how much a deal is worth, here are the exact steps to value the stock when a merger is announced using a stock swap as the medium of exchange. 1. Multiply the merged company's # of shares out standing by the exchange ratio. For ASND this would be .825216.9 MM, or 178.943 MM. That will equal the number of new shares the acquirer will have to issue to close the deal. 2. Add the number of shares of the acquirer (1,320,000) to the new shares to be issued from step 1. That gives 1,498,943, which will be the total number of shares o/s at the close of the deal. 3. Add the market cap of the two companies just prior to the deal announcement. That should be the market cap of the combined company, all other things being equal* . 4. Divide the total market cap (from step 3) by the total number of shares at the close of the deal (from step 2), and that will give you the theoretical price per share of the acquirer (LU). 5. Multiply the acquirer's stock price (from step 4) by the exchange ratio (0.825), and that will give you the theoretical price of the shares of the acquired company (ASND). In general (and again, all other things being equal) if the price of the acquiring company goes higher than the price determined in step 4 that means that the market is quite pleased with the deal because it sees immediate accretion of earnings and synergies. If the price falls much below that calculated in step 4 it means that it believes that the deal is dilutive. TTFN, CTC