Tuesday, January 09, 2007

Why I bought Eupa International

Eupa is using a reverse-split, going-private transaction as a lead-in to a merger with its majority shareholder, a Taiwanese company. Normally the merger would require some fairly expensive regulatory costs, but by executing a reverse split and suspending the reporting requirements (which require no proxy vote), those costs can be avoided. It seems to me the transaction is fairly safe now that the notice has been filed with the SEC since the benefits are fairly obvious and compelling.

I bought in at 35¢ and in a few weeks, I expect to get back 40¢ a share. This isn't the best profit (someone else bought at 30¢ later in the day), but it should be a fairly quick turnaround. One nice thing is that I was able to plow in my Pegasus cash which should result in an extra $44 gain.

Monday, January 08, 2007

Why I sold Pegasus Communications

I checked my brokerage website and it turns out I sold Pegasus Communications last Friday. Normally when I enter a going-private position like Pegasus, I initiate a limit-sell order near the cash-out price. It's sort of a safety valve in case the deal falls through later. Naturally, if the deal goes through (as this one had), I should raise the limit price to cover the commission cost which I won't have to pay when the reverse-split is paid. But the whole process is a bit silly since it's unlikely anyone will pay more than the cash-out price to purchase the shares. For some reason, someone did this time.

The final tally on the Pegasus Communications position was a 47.55% gain over 18 days. That works out to a 268,006.81% annualized return. If I had canceled or raised the limit order, I would have recorded a 111.80% gain, but my annualized return would have been much lower. Obviously, the total amount of this transaction is trivial. One nice thing about this deal is that my broker (USAA) recently lowered my commission from $19.95 to $11.95, which means I'm going to spend a lot less in the future.

Thursday, January 04, 2007

Why I bought Pegasus Communications and Meritage Hospitality Group

In another going-private transaction, I bought 99 shares of Pegasus Communications. With this press release, the company announced the shareholders vote and a name change to Xanadoo Company.

I'm also waiting on the results from Meritage Hospitality Group, which will hold its meeting on January 23.