Adam Thompson

Brasil Telecom a Steal Below $35

There's some confusion floating around here. BTM and BRP are equivalent to the preferred stock of Brasil Telecom and BT Participacoes (1 BTM ADR = 3 pref shares of BT; 1 BRP ADR = 5 pref shares of BT Part). Tele Norte Leste Participacoes is acquiring all the common shares of BT and BT Part. TNLP is also making a voluntary tender offer for 1/3 of the preferred shares of BT and BT Part. The tender offer is R$30.47 for BT Part pref shares and R$23.42 for BT pref shares, currently equivalent to $91.59 for BRP and $42.24 for BTM. But since TNLP will not acquire all of the pref shares, the price could eventually go higher after the takeover. It could also fall significantly after the takeover, of course.

I don't understand Amberger's comment that BTM's stock price seems buffered from the price fluctuations of its parent company. It looks to me like the prices of BTM and BRP have been moving roughly together, at least since the beginning of the year.

Personally, I think TNE is the buy here. (This is not a recommendation, of course. Do you own research before buying anything.)

Disclosure: I have a long position in BTM for one client. I have long positions in TNE for many clients and for one family member.