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Fun to watch
Old 11-07-2005, 02:55 PM   #1
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Fun to watch

Pre Paid Legal has been doing battle with a large contingent of shorts for several years. In what I think will be the beginning of the end of the war, the company is borrowing a chunk of money, most of which will be used for either dividends or stock buybacks. If the company uses all of it for buybacks, it could shrink the float by about 25%. Considering that something like a third of the float is short, this could occasion a rather ugly bout of short covering. OTOH, if they just dividend it all out, it would be upwards of $7 a share.

I've owned this thing for years, and I think it is probably approaching fair value ($50 or so). If it hits 50, I will finally start unloading some of my position. I mention it here because I think there could be a nasty short squeeze when or shortly after the company does whatever it is planning on doing. Based on what I see on Bloomberg, I think the company is just about finished doing what it has to to raise the cash.

Ultimately, this is a company that will probably be taken private.
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