interesting times ahead

The surprise outcome of Friday's vote is, if nothing else, confirmation that a large block of PGL shareholders are very keen to see PI88 commercialized in Asia.

Interestingly, a large number of shareholders must have split their vote: voting out most (the worst??) directors, but opting to keep JH (PGL's CEO) and Chang (PGL's founder). No doubt JH and Chang did the bulk of the lobbying.

As I understand the numbers, the largest voting block (i.e., the one that supported JH and Chang) constitutes one Australian fund manager, Medigen, Chang (of course), and virtually all of PGL's Taiwanese investors. It may also include a small number of shareholders from the PSG.

If the above-mentioned shareholders were primarily voting FOR PI88, then presumably they are highly unlikely to sell a majority of their stake into the buy back. This should mean that shareholders who want out at $1.10 should be able to sell 95%-100% of their holding into the buyback.

In order to see how I have arrived at this conclusion, we need to break down the numbers a bit further:
* 37mill votes were cast on Friday, or around 60% of PGL's register.
* Of this voting 60%, 60% (=22mill votes) voted for JH and Chang (and thus FOR the immediate development of PI88).
* So, we could reasonably conclude that the shareholders behind those 22mill shares are unlikely to participate in the buyback – or would only participate to a limited extent. Let's assume that they collectively sell 6mill of their 22mill shares into the buy-back (If they wanted to sell much more than this into the buyback, then it makes no sense at all why they – except for Chang – opted to vote for JH and Chang and against the CYT directors). This leaves 16mill shares or 26.5% of PGL's register that are unlikely to be bought back.
* Also keep in mind that around 40% of PGL's shareholders (holding around 23mill shares) typically don't bother voting at all. These shareholders are termed 'passive'. And if just 30% of this passive 40% (=7mill voting shares) don't elect to participate in the buyback (or don't bother returning their forms), then there should be more than enough cash available for everyone who wants out at $1.10 to get out.

Summing up:
I think it is realistic to assume that the shareholders who voted for JH and Chang will opt to hold on to to around 70% of their shares. I also think it is realistic to assume that around 30% of passive, non-voting small shareholders will opt to hang to their shares (or won't bother sending their forms in). If these assumptions are correct (or close to being correct), then shareholders who want out at $1.10 should be able to sell 100% of their shares into the buyback.

It is also interesting to note that, post buy-back, PGL's cash backing will be around $1.14 per share. The independent valuation report (which actually makes some realistic assumptions – unlike many 'independent valuations') values PGL post buyback at between $1.31 - $1.68. With the overhang of shareholders who want out removed post buy-back, and assuming the wider market continues to slowly recover, it is not unrealistic to assume that PGL could actually trade above $1.10 post buy-back. Indeed, a bit of financial support from the Taiwanese govt re PI88 could see the post-buyback share price soar. Perhaps the Taiwanese investors already have a sense that this will occur, and this might explain their strong support for PI88, JH and Chang.