The insiders are Prescott Investors (500,000 shares) a private equity fund, HC Stoneclipper (125,000) the president, Randy Harper (8,000 shares) and Kathy Pinson (6,000) - both very senior officers of the firm. What to make of this move when these four want to liquidate, especially Prescott Investors?
The corporate press release indicated that PPL would need 30 days to liquidate short-term investments to avoid penalties and then pay up. The press release also mentions that the company will use proceeds from a term loan issued by Wells Fargo (NYSE:WFC). We could use some clarification on exactly how the cash will work. The company apparently did not want to sell the shares on the open market. Hmm.
The company also went on to say “We have reduced the number of shares outstanding by approximately 43% from 23.6 million at March 31, 1999 to 13.4 million today” ("today" being Friday Nov 10, 2006). This has cost approximately $308 million to accomplish. Essentially, the share price has moved sideways since 1998.
The pre-paid legal services business is very attractive and has huge potential in a litigious environment such as the USA. The shares are trading near their 52-week highs. If they are being positioned for a takeover at a lower multiple, then why not finance with the company's own cash and buy back later at lower PEs.
But here is the kicker. The shorts are howling. 70% of the float is short. You need 90+ days to cover the short position. They are trying to squeeze out the shorts. But they may have to amputate without an anesthetic.
The stock is not for the faint of heart. Hopefully more news pending. Caveat emptor on this one as there are strange doings afoot.
PPD 1-yr chart: