Revisiting My Palm Bet

On April 12, Bloomberg News reported that Palm had engaged Goldman Sachs and Frank Quattrone’s Qatalyst Partners to find a buyer.  Palm closed at $6.04/share that day.  The next morning, I wrote “I’m Betting on a Palm Take Under or Bankruptcy.”   Considering the stock has traded as high as $14 this year, a buyout of $6/share or less would qualify as a take under in my book.   Needless to say, it wasn’t a very popular position.

The news yesterday shows how desperate the situation is becoming.

Eric Savitz, Barron’s, released an article after the close that will have analysts scrambling over the weekend.  He concluded that Palm was worth about $5.09 a share to shareholders after backing out debt and taking into consideration a preferred position of Elevation Partners.  That assumes the company was acquired for $1.2B – a number the company’s advisers had been previously seeking (Reuters).

I am becoming more confident in my stance with each passing day.  Being right is one thing.  Making money while being right is another.  The later is the one I care most about.  I tweeted the following before the close “$PALM will best its low this week w/o a rescue this weekend. $4.50 sounds about right for Mon…”  Let’s see how it plays out.

Palm on Friday closed up 17 cents, or 3.5%, to $5.03.

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