Stock Market and Disk Drive Operations

Question Why is Seagate undertaking this transaction? Is it necessary to loot the Veritas shares in a separate transaction? Who are the winners and losers resulting from the transaction? reply Seagate is undertaking this transaction to generate significant wealth gains for Seagate shareholders. There is a evaluate gap generates due to Seagates VERITAS stake. VERITAS stake rate exceeds the unblemished market capitalization of the Seagate. Seagate faces two problems because of VERITAS stake. First, the clubs core disk drive operations were not receiving full value in the market.Second, the company would incur a significant measure revenue liability if the company begin to monetize its VERITAS stake be selling the shares. Yes, it is necessary to divest the VERITAS shares in a separate transaction. It helps the company to save itself from tax liabilities and distributing the VERITAS stock tax free to its shareholders. The Seagate shareholders are definitely winner if the two- step transaction en assert happen. The shareholders of Seagate get higher value of disk drive operations and tax free shares of VERITAS. The Seagate Management is also winner.They get rid of tax liabilities associate to VERITAS stocks and get full value of disk drive operations. The VERITAS also disembodied spirit like winner as they get higher number of stocks in exchange of lesser number of stocks. Question Does the detrimental value of Seagates operate assets imply markets are inefficient? Solution The negative value of Seagates operating assets implies that markets are inefficient. The core disk drive operations do not receive its full value in the market. Seagates Management thinks that disk drive operations value is larger than what the value is in market.This shows that markets are inefficient. Question Why might a negative value exist? Solution Tax liabilities The negative value of the Seagates operating assets is due to tax liabilities which the company is facing because of VERITAS stocks. Other liabilities charge that managers will destroy value The negative value of the Seagates operating assets is not due to fear that managers will destroy value. Moreover, the investors have trust in the managers of the Seagate thats why they want to retain the top centering of the Seagate in the newly build company.