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.

Strategies & Market Trends : The Thread Formerly Known as No Rest For The Wicked -- Ignore unavailable to you. Want to Upgrade?

To: jimbos who wrote (48272)	6/3/1999 11:38:00 AM
From: michael j. brown	Read Replies (1) \| Respond to of 90042

it is from briefing.com from yesterday. would you like the entirety pm'd?

To: jimbos who wrote (48272)	6/3/1999 11:48:00 AM
From: michael j. brown	Read Replies (1) \| Respond to of 90042

jimbos you were right i pulled the wrong file april 1,instead of june 2. sorry, will repost.

To: jimbos who wrote (48272)	6/3/1999 11:55:00 AM
From: michael j. brown	Respond to of 90042

corrected copy, (check out bks/bnbn for like results). 02-Jun-99 10:00 -- 11:00 ET ZIFF-DAVIS (ZD) 13 +3/16 ZDNET (ZDZ) 18 5/8 -1 1/8The market is slowly wringing out its inefficiencies. The Ziff-Davis/ZDNet story is interesting because it has taken so long to happen. When ZDNet was first IPO'd as a tracking stock, the total value of ZDNet was larger than the total value of Ziff-Davis, even though Ziff-Davis still had a retained interest of 85% in ZDNet. We had a flood of emails about the issue: first asking how this could be, then a second flood telling us we didn't understand the value of ZDNet. We actually covered the issue at great length, because it looked like a clear arbitrage play, and second because it illustrated so well some of the irrationality in the market. The Stock Brief of May 5 explained at length how to play this arbitrage, (archived Stock Briefs are available to subscribers), and time has simply proven that the arbitrage gap is closing, with resultant profits to those who played it. From the time the arbitrage was actually playable on May 3, when ZDNet became shortable, the gap has been continually closing, as the table below shows. 5/3 Open Prices 5/3 Close ZDZ=33 11/16, ZD=16 5/4 ZDZ=32 3/16, ZD=15 7/16 6/1 ZDZ = 18 5/8 1/8 ZD = 13 Short ZDZ at 35 1/4 + 1 9/16 per share +3 1/16 + 16 1/2 Long ZD at 15 5/8 + 3/8 -3/16 - 2 5/8 Gain + 1 15/16 +2 7/8 per share + 13 7/8 The important thing to remember here is that this profit was guaranteed if you believe that the market eventually reaches efficiency, meaning you believe that a division cannot be worth more than the company that owns it. It didn't matter whether both stocks went up, both went down, or ZD went up and ZDZ went down, it was the imbalance that mattered. Is there still play left in the arbitrage? The approach we outlined on May 5 would imply that there is still considerable inefficiency in the stock prices, and that ZD stock price should currently be higher than ZDZ stock price by about 25%. This doesn't mean ZD stock price will rise, however, it is only the relative values that are still out of whack. To play an arbitrage you need both the long and short sides of the position. ZD