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Technology Stocks : Global Crossing - GX (formerly GBLX) -- Ignore unavailable to you. Want to Upgrade?

To: thebeach who wrote (505)	3/19/1999 5:51:00 PM
From: MangoBoy	Read Replies (1) \| Respond to of 15615

<< Why would FRO shareholders benefit if GBLX shares dropped in value more than if they appreciated in value. >> arrangements like this acknowledge that the buyer's stock is volatile and perhaps overvalued in the near term. the deal therefore places a 'fixed' value on FRO of $62/share, payable in GBLX stock. the final exchange ratio is determined by dividing $62 by the price of GBLX on the day the deal actually closes (or perhaps its 15-day trailing average). why would FRO shareholders benefit if GBLX is at a low point on closing day? because your FRO shares 'buy' you more GBLX! let's say you own 100 shares of FRO. if on closing day GBLX is at 55, your 100 FRO turns into around 113 GBLX. but if GBLX is at 35, you 100 FRO becomes around 177 GBLX. this makes no difference at all to someone who wants to bail out on the stock at closing, but if you're bullish on the combined companies long-term it's a different matter: you want to receive as much GBLX as possible. if you believe that GBLX can be worth $100/share post-merger, wouldn't you rather own 177 shares instead of 113? when GBLX hits $100 you'll be $6400 better off. the ideal scenario for FRO shareholders who intend to hold GBLX long-term is for GBLX to plummet in the weeks leading up to the closing of the merger, and then to take off like a rocket the next day. mark