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To: MRE who started this subject3/14/2002 8:17:07 AM
From: Softechie
   of 21876
 
Lehman on telecom
Lehman issued a broad survey of the telecom industry this morning, detailing how the industry is undergoing a massive restructuring. In telecom svcs, sees FON and Q as most exposed (see 7:11 FON downgrade); in wireless, sees AWE and PCS as survivors and NXTL and Voicestream at most risk; cuts ests on towers, and downgrades AMT to BUY from Strong Buy and SITE to MKT PERFORM from Buy; long-haul providers LVLT and TWTC will be hurt by consolidation of purchasing power; in wireline equipment, TLAB and NT at risk of lowering Q1 forecasts and TKLC, ADCT, and LU best positioned from customer perspective; prefers handset exposure in NOK and QCOM; in data networking JNPR is most exposed, prefers CSCO.

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To: Sabrejet who wrote (19432)3/14/2002 8:27:40 AM
From: sylvester80
   of 21876
 
The way I understand it is the following. The buyers of the notes hedge their position by one time shorting the equivalent amount in shares that they will be receiving during the convert. This is a one time thing. That is why you saw that 10x spike volume yesterday. For example, let's look at the last time this happened:

Short interest jumped from 36mil in Jul 2001 to 115mil in Aug 2001 during the time the convertible took place, and has stayed pretty much the same since then (if anything has gone down a little). The difference of 79 mil shares (+/- 10%) would be the short arbitrage positions that will be covered when the notes are called and are replaced my shares.

nasdaq.com

Feb. 15, 2002 108,400,980 20,582,523 5.27
Jan. 15, 2002 120,696,487 28,626,985 4.22
Dec. 14, 2001 108,395,174 26,131,385 4.15
Nov. 15, 2001 114,617,460 20,818,204 5.51
Oct. 15, 2001 106,425,776 21,891,594 4.86
Sep. 14, 2001 118,783,300 25,537,900 4.65
Aug. 15, 2001 115,316,612 35,466,965 3.25
Jul. 13, 2001 36,397,035 23,386,917 1.56
Jun. 15, 2001 40,569,232 19,991,695 2.03
May 15, 2001 36,769,332 30,636,523 1.20
Apr. 12, 2001 37,047,310 29,178,395 1.27
Mar. 15, 2001 33,097,686 23,416,200 1.41

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To: GVTucker who wrote (19433)3/14/2002 9:12:02 AM
From: Sabrejet
   of 21876
 
Thanks for the comparison. Question: "On the borrowed money an arb might pay fed funds plus a hundred basis points, or about $25,000." So what number are you using as a basis, the number after the $100K equity position? What is that figure? It seems that the $25K is a bit low.

At what time is the convert going to be completed, any idea? I guess around 60 days....

BTW, this is the type of discussion I prefer. Information and none of the crap that wastes time.

Sabre!

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To: Sabrejet who wrote (19436)3/14/2002 9:27:03 AM
From: GVTucker
   of 21876
 
Sabrejet, RE: Question: "On the borrowed money an arb might pay fed funds plus a hundred basis points, or about $25,000." So what number are you using as a basis, the number after the $100K equity position? What is that figure?

If you use $100,000 in equity to fund a purchase of $1,000,000, you borrow $900,000. Right now Fed Funds are at 1.75%, so Fed Funds + 100 bp would be 2.75%. 2.75% * $900.000 = $24,750. I used $25,000 for simplicity's sake.

At what time is the convert going to be completed, any idea? I guess around 60 days....

I think that the convert is already completed.

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To: GVTucker who wrote (19437)3/14/2002 9:40:46 AM
From: Sabrejet
   of 21876
 
I understood the math but I assumed something and realized it after I had posted. The 10-1 leverage is something I overlooked since I can't quite get away with that!

Sabre!

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To: GVTucker who wrote (19437)3/14/2002 9:50:47 AM
From: Sabrejet
   of 21876
 
If the convert is already completed what reason is there left to short other than dilution of shares? And if dilution was such a concern, exercising the convert out 10 +years leaves some puzzling questions as to why the issue would be concerned since the rate of return would be too generous to ever exercise closing the position.

Sabre!

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To: Sabrejet who wrote (19439)3/14/2002 9:57:18 AM
From: GVTucker
   of 21876
 
Most of the people that wanted to arb the convert probably shorted the stock yesterday. (Note also that some buyers of the convert might have been convert funds or equity-income funds that wouldn't hedge the long convert with a short common position).

For the most part, yesterday's decline was the market's adjustment for the dilution.

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To: telecomguy who wrote (19408)3/14/2002 9:57:31 AM
From: Sabrejet
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re:"IF the telco market was still heathy, LU would have 5% market share and NT would have 50% market share."

Yep, and if the Bill's would have kept Flutie....

Sabre!

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To: Sabrejet who wrote (19439)3/14/2002 9:59:52 AM
From: BWAC
   of 21876
 
<If the convert is already completed what reason is there left to short other than dilution of shares? >

Maximizing return. Until LU turns around and business fundamentals favor a sustainable price over $6.10 the liars, crooks, and thieves of the world have a get out of jail free card if they hold the convertible.

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To: GVTucker who wrote (19440)3/14/2002 10:01:20 AM
From: Sabrejet
   of 21876
 
That dilution from say $6 to me should have brought the stock down to around $5.40 or so. (10% at most 1.75B on a market cap of $20B).

I felt that was a worst case scenerio.

Oh well,..

Sabre!

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