With its computer leasing business hugely cash-generative, Comdisco Inc, Rosemont, Illinois, decided to set up an arbitrage unit to play the market in the hope of making money on takeover plays. It started out with $25m in April 1984, and within a year had turned that into a $25m profit. A sticky patch after abitratrageur a-bit-too-extraordinaire Ivan Boesky began singing his songs at the turn of the year led to one quarter’s losses, but the unit was soon back on an even keel, doing $10.4m profit in the fiscal fourth quarter to September, $27.6m in the year. But Black Monday dawned too suddenly for the arbs to run for cover, and the company saw profits at the unit vanish in the wake of the quake, so that its losses hit a grand total of $100m, more than 80% of it on October 19. And that could wipe out the first quarter profits of its parent, although it is too early to quantify the final bill for over-exposure: $10m of the loss has already been recouped, and if some of the bids in the stocks it holds still go ahead – no doubt it holds for instance some Telex Corp shares, which are currently well shy of Asher Edelman’s firm offer of $65 a share – the losses may be cut sub-stantially. With $3,000m in assets, the effects are anyway not going to damage the parent much.
Content from our partners
