"If they are not taken into account, then should a model be...

"If they are not taken into account, then should a model be applied to the likes of KAR??

- Stevo, they are taken into account. If you view the stock favourably the premium above offer is less. This is the QUALITATIVE FACTOR in the model.

Also, i'm not talking about the stocks long term prospects in isolation here, i'm talking about price arbitrage. Simply the offer price vs the current price, and the risk the price will fall below or at offer. Investing in the SPP is a cash substitute, hence i use the risk free rate (cash rate) as i want that return at a min. Then i look at the AAA bond spread for the inherent risk of equities above the cash rate. I use today's VIX vs an average for volatility, and also KAR 90 day prices vs ASX200 90 day to see how KAR price moves vs market....obviously more volatile. These factors combine to give me a suggested premium. Obviously if the VIX is swinging wildy like in 2008 the premium will be alot higher.

I'm trying to discern the premium i need to participate. That is all. For me i'd like to see it above $5.39, because i have a strong positive outlook on the stock. It's really about asking "what are the chances this thing will move below $5.10" and coming up with a way to figure that out.

Ofcourse this is all subjective. One might not want to use the cash rate in the model at all.

- Mithril, your position assumes no scale backs. If your purchase price is above the $5.10 by a material value it is ofcourse worth it, provided you receive your allocation IN FULL. Mithril, every number is questionable, but my modelling takes into account various quantitative factors then overlays qualitative (my opinion of the stock).