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To: Benkea who wrote (7050)	3/28/1999 4:07:00 PM
From: Nicholas Thompson	Read Replies (2) \| Respond to of 29970

I don't think the 104% is anything worth focusing on - it is simply coincidence that the amount agreed upon required that ratio. Companies that never split like berkshire must pay something like .00xx shares to acquire shares of companies with normal share prices. However, I think it would be worthwhile to think about the effects a cancellation of the merger would have. After looking at what happened with lcos/usa/cmgi I think it is safe to say that no one can guess the outcome "so far in advance" (internet time...). I wouldn't put lots of money in a short position on any internet stock. The fact that you've countered the athm short with xcit shares helps a little but don't put a major slice of your portfolio into this deal. You never know, AT&T could buy athm outright at a 50% premium and excite could founder in a general market slump. One of the two is unlikely but just remember a short position opens up unlimited loss possibilities.

To: Benkea who wrote (7050)	3/28/1999 9:56:00 PM
From: KW Wingman	Read Replies (1) \| Respond to of 29970

you wrote: To: Frank A. Coluccio (7049 ) From: Benkea Sunday, Mar 28 1999 3:29PM ET Reply # of 7078 RE: ATHM/XCIT merger I dared not ask this question on Yahoo for fear that it would melt the minds of the 13 year olds there. Why is ATHM ($18.76 bil market cap) giving XCIT ($7.55 bil market cap) shareholders 1.049102 ATHM shares for each XCIT share? I ask this because I bought XCIT Thursday or Friday and shorted 1.049102 shares of ATHM for each XCIT share to capture the 14% discount for a deal that should close in 2 to 6 weeks. This provides and relatively low-risk annualized return of 168% based on a 4 week closing. The 1/18/99 press release says "about 3 months". Anyway, I would like to add to the position this week, but I am getting worried that I am missing something cause it just looks to easy. Things that look too easy usually aren't. Can anyone help me figure out why an acquiring company whose market cap is 148% greater than the target company would pay 1.04 of itself to buyer a company worth 40% of itself? Thanks in advance!>>>>> *** It has to do with the number of shares outstanding in each company and the market cap before the deal was struck. ATHM has 123.3 million shares issued XCIT has 53.83 million shares issued For purposes of understanding, it may help if we simplify the ratio above; so say ATHM had 10 shares issued and had a market cap of 10 billion. and XCIT had 1 share issued and had a cap of 5 billion. Each share of XCIT is worth 5 billion while each share of ATHM is only worth 1 billion so you can see why a premium would be paid to the XCIT holder in a merger between the two companies. This principal is exactly what happened. The numbers were different. In addition a premium may have been paid. I did not work out the exact numbers.