Monday, 15 August 2016

A Stock Purchase Agreement On IPDN Has A Similar Feel To SPU

Professional Diversity Network, Inc. (IPDN) announced that it has entered into a definitive agreement to sell a controlling stake in PDN to Cosmic Forward Limited for $1.20 per share. IPDN will also commence a partial issuer tender offer to purchase from its stockholders up to 2,500,000 shares of its outstanding common stock at a price per share equal to $1.20. Here is a link to the SEC filing relating to this deal, so there can be no doubt that the intentions are real. The stock trades at 72 cents, so someone who buys it at that price will make an easy short-term 67%. Even someone who buys it at 80 cents or a buck will make an easy 50% or 20% in relatively short order.

Anybody who wishes to sell $1.20 will be pretty much guaranteed that they can, according to the SEC filing. The company itself is not only buying back shares, but any shareholder can sell up to 1.65 million shares to CFL:

"Pursuant to the Purchase Agreement, PDN has agreed to commence a partial issuer tender offer to purchase up to 2,500,000 shares of Common Stock as soon as reasonably practicable following the execution of the Purchase Agreement (the “Tender Offer”).  The price per share to be paid for each share of Common Stock validly tendered and not withdrawn shall be paid from the proceeds of the Share Issuance and Sale and shall be equal to the Per Share Price, net to the tendering holder in cash but subject to reduction for any required withholding of taxes (or any higher price offered and paid pursuant to the Tender Offer, subject to the mutual agreement of PDN and CFL). In addition, pursuant to a co-sale right, an existing shareholder of PDN will have the right to sell up to 1,647,397 shares of Common Stock to CFL as of the date of the Purchase Agreement (the “Co-Sale Right”), and such Co-Sale Right, to the extent exercised, will reduce the number of shares of Common Stock to be purchased by CFL directly from the Company."

With the stock trading so low, people obviously don't believe in this deal, but it won't take very long to find out how serious it is. Another part of the SEC filing says:

"Pursuant to the terms of the Escrow Agreement, dated as of August 12, 2016 (the “Escrow Agreement”), by and among PDN, CFL and Wilmington Trust, N.A., as escrow agent (the “Escrow Agent”), CFL has agreed to fund no later than August 19, 2016 approximately $1.7 million (the “Escrow Amount”) into an escrow account with the Escrow Agent as security for CFL’s potential termination fee obligations under the Purchase Agreement described below. The Escrow Amount will be held by the Escrow Agent in accordance with, and released pursuant to the terms and subject to the conditions set forth in, the Escrow Agreement."

Cosmic Forward Limited, or CFL, will be funding into an escrow account $1.7 million on August 19th as security for this purchase agreement. We are reminded of the deal announced by SkyPeople Fruit Juice, Inc. (SPU) in June:

"On June 15, 2016, Hedetang Holdings Co., Ltd. (the “Hedetang”), a wholly owned subsidiary of SkyPeople Fruit Juice, Inc. (the "Company") entered into a Share Transfer Agreement (the “Agreement”) with Shaanxi New Silk Road Kiwifruit Group Inc. ( the “NSR”), a limited liability corporation registered in China.

Pursuant to the Agreement, NSR will acquire 51% of the equity shares of Shaanxi Guoweiduomei Beverage Co,. Limited, a wholly owned subsidiary of Hedetang (the "Shares"). The tentative total transfer price for the Shares is 300 million RMB (approximately $46 million) and is subject to and will be settled according to the final price in the valuation report to be issued by an appraisal firm jointly engaged by both parties."

SPU also had a Chinese investor interested in buying a controlling 51% stake in the company, and at first no one believed that one either. On June 22 the stock price opened $3.01, up 68% from the previous day's closing price. The stock hit a high of $3.94 in early trading but sunk to $2.68 by the end of the day. That was a significant discount to the offer made by NSR. But by July the company caught on fire and shot all the way up over $20 and sits at $9 now.

People who buy into IPDN soon at these low prices will probably see big gains at least to $1.20 and maybe beyond that if IPDN can catch on fire and be susceptible to a short squeeze just like SPU was.

Readers are also reminded of the recent articles on Peak Positioning Technologies Inc. (PKKFF), which is forecasting $500 million in revenue next year and moved up 6% today and Neovasc Inc. (NVCN), which has been up and down recently, but was up over 20% today and is still up about 45% from our original call at 46 cents

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