25 percent short term upside

Small cap fund managers have been carefully accumulating PGL over the last month or so. They're likely still accumulating in small parcels of 50k or 100k so as not to push the sp up.

I'm assuming the reason for their buying is threefold:

(1) They have checked PGL's accounts and know that there are no significant obligations. So the $70mill in bank-held cash is safe.

(2) They are betting that PGL shareholders will overwhelmingly vote down the AVX merger. (Substantial fund managers alone now control around 21%, but if funds with a holding of below 5% are included, my guess is that these funds now collectively control around 30% of PGL. And in this market, small shareholders will also likely see real cash as far more attractive than AVX risk).

(3) They are betting that once the merger is voted down, PGL management will have little choice but to return all the cash to shareholders. (Do any PGL shareholders – apart from PGL directors – see the AVX deal as more attractive than cash at $1.10??).

Returning $70mill will pay $1.10 at a minimum, but could pay as much as $1.15, depending on options exercised, management payouts, incidental closing costs., etc. Many instos have been buying at around 83-85c, and in a bear market where cash is king, this kind of short term upside is rare and highly sought-after.

The only caveat to this scenario would be if PGL is trading well above $1.15 on the days leading up to the PGL vote. While such a price spike looks unlikely at the moment, it could happen if, for example, AVX were to announce an attractive deal with big pharma that is conditional on the merger proceeding. Either way, PGL shareholders who bought below $1.10 will win.