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From: rs55611@ihuxk.UUCP (Robert E. Schleicher)
Newsgroups: net.invest
Subject: Re: Old & New AT&T Stock
Message-ID: <553@ihuxk.UUCP>
Date: Fri, 3-Feb-84 14:45:44 EST
Article-I.D.: ihuxk.553
Posted: Fri Feb  3 14:45:44 1984
Date-Received: Wed, 8-Feb-84 04:17:43 EST
References: <328@hogpc.UUCP> <156@cubsvax.UUCP>
Organization: AT&T Bell Labs, Naperville, IL
Lines: 27

The comment that many closed-end mutual funds sell for big discounts
with respect to their actual cumulative market value is a good one.
The situation is analogous in some ways with the situation that exists when
the total value of a company's stock is appreciably lower than the market
value of the assets owned by the company.  When this occurs, there is quite
often a takeover attempt, with liquidation of the company as the object.
The plan is:  get control of the board of directors, or present a resolution
to the shareholders, via the proxy voting cards.  Then, liquidate the company's
assets, and distribute the proceeds to all of the shareholders.  This situation,which sounds like it shouldn't exist, is actually relatively common with
companies whose assets are largely land, mineral rights, timber rights, etc.
Thus, the assets have intrinsic value on the open market (as opposed to  
assets like factory machinery, which is only of use to the company itself,
or to a competitor).  There was an example in Fortune magazine recently,
in which a company owned land surrounding Disney World in Florida, which
was worth about $20/share (prorated out).  At the time, the stock of this
company was selling at about $8, probably reflecting the fact that all
of this land was not producing any income.  Theoretically, dissolvingthe
company and selling the land would give $20 per share, a 250% gain.
Of course, the company's officers aren't thrilled by this idea, unless
they also own a boatload of stock.

I've also heard of liquidation attempts on closed-end funds.  When news
of this hits, it tends to drive the price of the fund toward the actual
value of the holdings of the fund.

Bob Schleicher
ihuxk!rs55611