Something is happening behind the scenes at Peregrine Pharmaceuticals (NASDAQ:PPHM).The company is one we have looked at on quite a few occasions over the last 12 months and it's one that, across the period, we have repeatedly suggested is undervalued on what we see as market oversight. PPHM Daily ChartWhen we last looked at it, on September 12, here, Peregrine went for $3.15 a share. We suggested that it could only be a matter of time before markets realized that this price amounted to a market capitalization of just two times annual revenues and that nearing cash flow positivity combined with a strong and extremely promising lead development asset in the oncology space would drive an upside revaluation heading into the close of 2017 and beyond.The company will open the session this morning (Tuesday, October 17) at $4.04 – a close to 30% appreciation in around four weeks.Take a look behind the action, however, and things get a little complicated.There is an ongoing and developing situation between an entity called Ronin Trading, which when combined with a second entity called SW Investment Management holds a circa 9% stake in Peregrine, and the latter.Basically, Ronin isn’t happy with the company, with its concern rooted in Peregrine's actions surrounding nomination of a fresh board member or two to the company's BoD. Ronin wants to get some independent board members in place. Peregrine previously indicated that it wants to do the same, but then nominated an insider, Dr. Roger Lias, as its candidate for BoD instatement.Ronin wants to take Peregrine to court to essentially force the company to hold an annual shareholders meeting (which normally happens in October, but that so far Peregrine management has delayed) at which shareholders can vote down the current board and replace it with some independent members.Normally, this sort of in-house fighting would put pressure on a company from a market capitalization perspective. In this instance, however, and as outlined above, markets are trading up on Peregrine and don't look like they're going to stop doing so near term.So why this sort of counterintuitive action?Well, we can only speculate, but it looks as though markets are buying Peregrine in anticipation of a potential partnership or outright sale to a third party. That Ronin wants to get some independent directors on the board and, concurrently, wants to dilute the amount of insiders that control the company, suggests that there is a buyer lined up. Combine this with the fact that management seems to be stalling any leadership reshuffle, suggesting that the current team wants to try and increase share price before a sale (there is a near term data release that has potential to do just that) and our speculation doesn't seem too far out of left field.Consider this – Ronin has a buyer lined up that is willing to pay a small premium to current share price. Management doesn't want to sell, so it's delaying an annual meeting (because shareholders have the potential to not reelect the team at said meeting).It would make sense, in this situation, that Ronin would take Peregrine to court to try and force it to hold the shareholders meeting and, by proxy, try and pave the way for a buyout. Ronin is, after all, just a hedge fund. Hedge funds want to minimize risk in these sorts of situations and Ronin can do exactly that, while walking away with a reasonable return, if the company sells in and around current prices.Again, this is all speculative and there is no confirmation that Ronin wants to sell, never mind has a buyer lined up.It's not too unreasonable to suggest, however, and it looks as though, based on recent action, markets agree.Check out our previous coverage of this one here. We will be updating our subscribers as soon as we know more. For the latest updates on PPHM, sign up below!Image courtesy of Jitze Couperus via FlickrDisclosure: We have no position in PPHM and have not been compensated for this article.
Is Peregrine Pharmaceuticals (NASDAQ:PPHM) About To Be Bought Out?
