The nonstop plunge in AOL and Time Warner shares is making some people on Wall Street very, very nervous.
At yesterday's Big Board close, the "spread" the premium Time Warner holders will get on their stock for one and a half shares of AOL had in fact become a discount of 25 cents.
Though Time Warner stock is still up 18 percent from where it was before the deal was announced, the spread at that time was about $43 a fantastic 66 percent premium for Time Warner shareholders.
Time Warner exec Ed Adler told The Post that insiders are "confident that we will build a new kind of company with tremendous shareholder value."
One Time Warner insider said the fact that there is no spread between the prices of the shares is no cause for alarm. It makes sense for 1.5 shares of AOL to equal a share of Time Warner.
If, however, the stocks don't move in tandem from now on, that would mean trouble in what company brass is already calling "deal hell."
Levin, the head honcho of Time Warner, and Steve Case, who runs America Online, have seen their stocks get pummeled in the weeks following the announcement of their megamerger.
AOL got pounded yesterday in composite trading, closing at $51.75, down $2.25, and putting the value of its once record-setting bid at only $117 billion.
Time Warner, meanwhile, also took a beating, closing at $77, down $3.50.
The weakness in the stocks has left some Wall Streeters wondering yet again of there might be someone in the wings, crafting a plan to foil AOL's bid.
One industry source told The Post that while there is no evidence that a rival deal is in the making, he believes that the potential for a rival bid would be "a logical reason" for the price drops, which he calls "curious."
This deal "has not gotten the greatest reception in the world," he added. "Time Warner is a jewel, and it's going to be off the market for forever if this happens."
Arbitrage traders who make their money by betting on the difference between what a suitor is willing to pay for a target have all but given up on making money on the deal.
That's because the spread has disappeared so quickly, which some Wall Streeters say is unusual, considering the deal isn't expected to be completed till almost a year from now.
From the beginning, industry watchers were raising a red flag over the fact that Levin and Case made a deal that had no downside protection for Time Warner shareholders.
Instead of slapping what Wall Streeters call a collar on the merger which essentially would commit the two sides to the deal only if AOL's stock held up to a specific trading range Case and Levin took the plunge without a net.
There are also fears that Time Warner shareholders may vote against the deal if the stocks don't move together and their premium shrinks.
There are also jitters among AOL holders, who have taken a bath.
Their shares have plunged more than 27 percent since the deal was announced Jan. 10.