Current Price – $669
Odd Lot Cash Out – $689
Upside – 3% or $5,000 for odd lots
Expiration Date – TBD
This is the third time that PCO is published on the site (see here and here). Company just did a reverse 100-1 split at the end of last year and now is carrying another 250-1 reverse split. Fractional shares will be cashed out at $689/share. After the split one PCO share will cost c. $167k, making this company uninvestable for majority of investors with smaller than $1m portfolios. On top of that PCO has already lowered its reporting requirements after the last reverse split, so no recent public information is available, including any details on the currently proposed reverse split.
The only place I am getting info is this Twitter feed, which has an extract of the document:
Transaction is subject to shareholder approval, but executive chairman has c. 67% of voting control, so I take this approval as given.
Why is management doing this?
Chairman is literally buying $1 for $0.85 as cash stands at $758/share and BV/share at $804. Moreover, during 2017 PCO generated $128/share in cash (albeit part of this might be lumpy and and driven by patent litigation settlements). The official purpose is to reduce shareholder count below 100, so that PCO is not classed as an ‘Investment Company’.
Risks to take into account
- I do not have access to reverse-split docs and I am basing this on the document posted in the Twitter feed only.
- Timing is uncertain. The first reverse split was cancelled and then reinstated and eventually took almost 8 months to close.
- In case transaction is cancelled I would expect the downside to be limited – shares always seem to trade at rather stable discount to cash and have remained at similar levels since the annual result announcement in mid-Feb.
- Liquidity is low and there might be limited opportunities to acquire shares.