I usually put money into medium- and large-sized firms with confirmed enterprise fashions. However I personal the odd penny share. One I’m significantly enthusiastic about has soared 28% up to now month, though over 5 years it has fallen 90%.

However some current developments led me to purchase extra shares on this firm – right here’s why.

A pleasant downside: masses of cash getting dusty

The corporate in query is Logistics Improvement Group (LSE: LDG).

With a market capitalisation of £75m, this can be a pretty modest operation. It additionally has important shareholders which have particular (and competing) visions of how the corporate should be run. I see that as a danger for a small shareholder like me, however additionally it is a possible alternative.

Final 12 months, an activist investor launched a marketing campaign — finally unsuccessfully — in search of to wind down the corporate and distribute its belongings to shareholders.

The explanation for that’s fascinating for my part. LDG is principally sitting on a big pile of money. The group’s money place final month was about £44m, nearly 60% of its whole present market capitalisation.

Unlocked worth in funding portfolio

Not solely that, however the firm owns stakes in quite a few different corporations.

For instance, it’s a shareholder in Alliance Pharma. Final week, it was introduced that Alliance had agreed to a takeover bid at a price 41% increased than its share price the day earlier than the takeover was made public.

LDG not directly owns 13% of Alliance. It should obtain an equal stake within the new non-public firm. Final month, LDG additionally introduced that it had redeemed a £10m debt be aware it held in one other firm for £13.1m.

At that time, the corporate additionally laid out a plan I feel is geared toward mollifying its activist shareholder, proposing a young provide at 19p per share to return up to £21m to shareholders.

If that’s authorised by shareholders (which I anticipate it is going to be), LDG will purchase again a specific amount of shares for 31% increased than they are often purchased for on the open market proper now.

Why I’ve been shopping for

That information led me to extend my stake on this penny share. The sizeable low cost of the share price versus the proposed tender provide factors to ongoing dangers.

The tender provide could not full, for instance. Even when it does, its scale is capped, so there isn’t any assure of what number of shares I could possibly promote again to the corporate on the 19p price.

Even contemplating that although, I proceed to see potential deep worth right here. LDG is sitting on a big money pile it has explicitly got down to cut back by shopping for again some shares at nicely above their present price. It’s also sitting on quite a few investments that, because the debt be aware sale and Alliance takeover illustrate, might finally develop into value greater than their present carrying worth on the corporate’s steadiness sheet.

They might not, after all. However on steadiness, I reckon LDG is a share that might finally be value considerably greater than its present price suggests.