Business: Wall Street's Highest Rollers

Multimillion gains—and losses—in arbitrage

Arbitrage until a few weeks ago was only a somewhat mysterious word to the average investor. Then it became known that a handful of Wall Street arbitragers who like to speculate on corporate takeovers were the big winners in a bidding war for Babcock & Wilcox Co. (TIME, Sept. 5). As soon as United Technologies Corp. made an opening tender offer, the arbitragers began sinking $100 million—much of it borrowed—into purchases of B & W stock, starting at $42 a share; they quickly bought up more than a quarter of the outstanding shares. Then they sat back happily...