As Gator explained, the arbs short position is AUTOMATICALLY covered the moment STLW shares are distributed. They do not take any action at all to cover, they do not have to 'buy' any shares to cover, they do not have to decide when to cover - it is automatic. The moment the STLW shares are distributed, the ARBS have no STLW position.
The arbs must then sell their METHA position to complete the arbitrage.
ok poodle...I am sorry people if I assumed that the distribution would happen prior to opening of trades...poodle I assumed there was a transaction fee charged so I assumed it to be a covering transaction... Are you saying that it automatically happens with no transaction fee because the distribution comes with no charge? thanks for the advice.
I am just trying to piece together what is going to happen. I benefited from the COMS/PALM deal but wasn't too sure of exactly how and why the stock traded the way it did...poodle/gator if you have further info on how an arb like this one has played out before, it surely would be helpful to many on the board...thanks again.
Can you explain the COMS and COMSv situation if I was not correct on that point also?