Following the announcement of the company’s second quarter results, the stock soared 38.46% and closed at $0.72 on a nearly 18 million share volume. The good financials must have provided for that value, but a number of investor alerts sent out throughout the day have probably also added to that volume, which is more than seven times the average for the stock. Thus, the “smart play” PEIX jumped within a day far above its 50-day moving average and is about to get overbought.
The company’s recent efforts to solve the problem with the heavy indebtedness is a positive signal for the market, that along with the increased sales and the positive net income for the last three months ended this June as compared to a net loss for the same period of last year attracted investors yesterday. Obviously, they did not seem bothered by the fact that the profit resulted from some large cash gains from some of the company’s subsidiaries that recently emerged from their bankruptcy proceeding.
It seems also, that the repayment of part of Pacific Ethanol’s debt came previously at the expense of extreme shareholder dilution. Still, the largest part of PEIX debt is due on the short term, in fact, the company already defaults on $12.5 million of its $16.2 million in notes payable. In connection with that, PEIX is a party of certain agreements to satisfy that outstanding debt.
According to an agreement of the lenders with another company dated back to March this year, that particular company would purchase claims in respect of PEIX’s indebtedness in up to $5 million from the lender, which claims can then be settled in exchange for shares of PEIX common stock at a certain discount from the current market price.
During the first half of the year, the company has issued 24 million shares in exchange for $19 million in debt extinguishment. That transaction resulted in a loss of $2.2 million for the company.
