Hi MajorD!

I think there is the potential here for the tail to wag the dog. The merger approval process is still in the early stages and the resolution is many weeks away. As that deadline draws closer the two stocks should trade more closely in line with the 20-1 merger ratio. Meanwhile I think there is the potential for a real surprise breakout in silver to happen, which may be underway even as I speak.

AUM is very tightly held. There is a large chunk of the stock owned by institutional investors that were not selling during the downtrend and will probably not sell now. So a much smaller chunk of the float is available to meet retail market demand. As silver starts to regain momo, I suspect that AUM may become attractive to retail shareholders again too. That means buying pressure and with few shares to feed the market, the price will rise.

AUM is active in its own prospects outside of the scope of this merger. Any of these may have a breakthrough discovery that could propell the stock much higher.

The number-crunchers that dig into merger transactions are probably plugging assumptions into their models right now, on how ECU may contribute synergies to the Newco. So far I have not seen any formal disclosure from analysts that cover either stock, but I do expect sooner or later we should get an update on how this transaction may contribute to the bottom line, beyond the wait-and-see nonsense that one brokerage house put out last month. That too could ignite a rally.

The last point is that longs may smell blood in the water if we do get a sudden rally for the sector this summer. I have do doubt that it is widely understood that a large short position against ECU is stranded. Since some dummies are so happy to sell into that short it may not be an issue. But if people suspect a squeeze may be at hand, vultures may be attracted to speculate on AUM and/or ECU just on the potential that short buying will move each of them as that ECU short is unwound.

Things could get very interesting. And if we just get a simmering market for the summer, I still expect fireworks in the fall. I repeat my sentiment has turned bullish because almost all of the risk overhang for ECU has been resolved pending this merger. I firmly believe we WILL see a much higher price for AUM this fall, and therefore ECU shares held through the merger will produce a nice gain.

cheers!

mike

Voluntary disclsoure: ECU is a core holding for me and I have added more shares this week. The company is a paid advertiser on my website.