Small Cap Stocks

This morning Pacific Internet (PCNTF), a stock we’ve been holding since last February, finally received a new acquisition offer from Asia Netcom, for about $10.15 per share. Interestingly, this new offer is close to the valuation we suggested for the shares back in June, when MediaRing upped their offer. A full discussion of the valuation scenarios for PCNTF can be found by clicking here.

So what should you do with you shares of PCNTF given the new, higher offer? Well, we’re still holding on. Given the significant increased valuations for IP Service Providers worldwide over the last six months, we think that $10.15 per share is not a fair valuation for PCNTF. Therefore, we don’t expect management to favor this offer and it’s possible that additional bids for the company will come in.

Please Note: We first recommended Pacific Internet (PCNTF) at $7.60, and still hold a position in the stock. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.

Congrats to our subscribers who have held on to Pacific Internet (PCNTF). Today, MediaRing increased their bid for the company to $9.50 per share. As I mentioned in this post about a month ago, I think PCNTF is worth between $10-$12 per share, so this new offer is getting very close to my estimated fair value of the company.

So what am I doing now? I’m still holding onto my shares for reasons related to taxes and the timing of a potential acquisition. All in all, I have no urgent reason to sell right now and of course there is still the possibility of a higher offer. At the same time, I would not be purchasing new shares at this price,  since I suspect that, though management will reject this offer, they will have a very hard time convincing shareholders not to accept it.

Please Note: I first recommended Pacific Internet (PCNTF) at $7.60, and still hold a position in the
stock. All ideas, opinions, and/or forecasts, expressed or implied
herein, are for informational purposes only and should not be construed
as a recommendation to invest, trade, and/or speculate in the markets.
Any investments, trades, and/or speculations made in light of the
ideas, opinions, and/or forecasts, expressed or implied herein, are
committed at your own risk, financial or otherwise.

Today Pacific Internet’s (PCNTF) board and management finally released the recommendation of the Independent Directors of PCNTF and the opinion from KPMG Corporate Finance to the Independent Directors, as regards to MediaRing’s offer to purchase Pacific Internet’s shares at $8.25.

If you are a shareholder of Pacific Internet, I encourage you to read the full SEC filing, available by clicking here. In this post, I have summarized some of the key findings. KPMG’s analysis is quite interesting, since it gives a very good basis, and an excellent valuation lesson for that matter, for determining the future value of Pacific Internet, as well as, other Internet-related shares that I follow on this blog (e.g. IIP, WWWW).

Investment Summary:
I believe that Pacific Internet (Nasdaq: PCNTF), at its current price of about $7.60, represents a low-risk Internet investment, with substantial upside price potential in the next year, as the company capitalizes on new growth opportunities, under the guidance of a new CEO. In addition, with the recent unsolicited buyout offer of PCNTF, the stock could see more upside if the company gets into play as an acquisition candidate.