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Conference nyoss1::market_investing

Title:	Market Investing

Moderator:	2155::michaud

Created:	Thu Jan 23 1992
Last Modified:	Thu Jun 05 1997
Last Successful Update:	Fri Jun 06 1997
Number of topics:	1060
Total number of notes:	10477

677.0. "Paramount Takeover" by KOALA::BOUCHARD (The enemy is wise) Tue Feb 08 1994 15:30

    Anybody following the Paramount disaster/takeover?
    
    As a lucky Paramount shareholder I'm at a loss at what to do.  The
    current offers for Paramount involve a mass of securities; the net
    value is on the order of $83-$85/share.  However, Paramount is trading
    around $77/share.  I can sell my shares on the market, but it seems
    like the "professionals" are making a killing on people doing this.
    
    But, if I hold onto the shares, I end up with a mass of things that may
    be costly to dispose of; in fact, nobody can tell me how many will have
    markets.  Anyway got any thoughts on the process?
    
    (For those who don't follow this, the current Viacom offer would
    involve exchanging my Paramount stock for all of the following:
    
    	1. cash for 50%
        2. some number of Viacom shares
    	3. some number of 'rights' which go up in value when Viacom stock
           goes down in value, protecting in part the value of (2)
        4. 8% 12-year notes
        5. some number of warrants to purchase Viacom at $60 in 3 years...
        6. some number of warrants to purchase Viacom at $70 in 5 years...
    
    (1) is easy; (2) is too, as the shares currently trade.  (3) is an
    odd beast.  (4) is easy to value, but I have no idea what kind of
    market will exist for these.  It looks like each 100 shares of
    Paramount will end up with about $875 face value, which isn't an 'even'
    amount for a bond...  No idea if they'll be a secondary market for
    these.  (5) and (6) at essentially long term options, but won't be in
    'even' units either...

T.R	Title	User	Personal Name	Date	Lines
677.1	I'd sell for $77 now	BROKE::SHAH	Amitabh "Amend Constitution: ban DECAF"	`Tue Feb 08 1994 16:39`	2
	I'm bearish on whatever combo that becomes of Paramount: a highly debt-laden company in a highly competitive market.
677.2	Run	NYOSS1::WALKER		`Wed Feb 09 1994 14:15`	2
	I'm conservative. If I made 60% in a short time on a stock (from 50 to 80), I'd take my money and run.
677.3	Market for new securities?	KOALA::BOUCHARD	The enemy is wise	`Wed Feb 09 1994 14:21`	10
	re: .1 and .2 I'm not debating on holding onto Viacom stock; I'm getting out soon. I was hoping somebody had some insight on the two options. The securities being exchanged for Paramount are more valuable than Paramount can currently be sold for, but these securities may be more difficult to liquidate. Hopefully somebody knows more than I about what markets will exist for these new securities...
677.4	Not conservative	KOALA::BOUCHARD	The enemy is wise	`Wed Feb 09 1994 14:22`	3
	And, if it matters, I don't need to be conservative with these funds. I can accept any degree of risk, if justified by potential reward.
677.5		NYOSS1::SAMBAMURTY	Raja	`Wed Feb 09 1994 15:41`	15
	I am more or less in the same kind of predicament. Although i am inclined to sell and take profit, I am intrigued by the Viacom-Blockbuster-Paramount combo (plus the phone company). I think its a good company, sell or hold (heck thats what got me interested in the first place). They own NY Knicks & Rangers, MSG, own parts of Mcmillan publishing, all of Simon & Schuster, Prentice hall, they own some indepedent TV stations, some movie theatre chain, all of which are consistently profitable. Of course they also own studios, produce TV series which is mostly year-to-year as far as profits (except for the Star Trek and all of its offshoots which bring in good money). Starting last year they even got into the amusement park business. re: .1 Debt ?, I don't think this deal is anything like Time-Warner. Paramount currently has negligible debt and a good cash hoard.
677.6	The odds favor holding	VMSDEV::HALLYB	Fish have no concept of fire	`Wed Feb 09 1994 16:04`	11
	Rich, the market is evaluating the deal at the current price. As you noted there are arbs ("Risk Arbitrageurs") who make their money by taking on very limited risk. So I'd say you will probably do better just by holding on -- since you don't need liquidity -- than by selling at the market now. Things are this way because the market as a whole is risk-averse so people willing to assume risk can often profit. And this is one reason Viacom's offer seems more popular -- QVC wasn't willing to reduce downside risk like Viacom. John
677.7	Answers to my own questions	KOALA::BOUCHARD	The enemy is wise	`Thu Feb 10 1994 10:51`	13
	I answered a few of my own questions: The CVRs (which are being issues 1 for 1 with the Viacom B stock, and are designed to lessen the risk of holding Viacom) are expected to trade on the American Stock Exchange. The 8% 12 year notes are only being issued in even $1000 principal amounts; odd amounts will be paid in cash. Certainly makes it a lot easier for a market to exist in these. The warrants are apparently being issued in odd amounts. Haven't been able to determine if/where they will trade, but they aren't likely to be very valuable anyway.