Replies to post #584 on Pacific Health Care Organization Inc. (PFHO)

[investorone]

Argyll-thought you had vanished! Triad can explain it in detail but the way I look at it, why would they sell as the price would be slammed downward since they own so much (so they'd lose a lot of money going down in price along the way) and also they may have it set up so their family members would get the stock passed down if the situation arose (if they decided to retire and/or a serious event occurred). I think then it is a question of their interests being aligned with their shareholders, and since they have such a large percent of the stock they want it to succeed and that is to our benefit as well at least as it seems to me.

[triadtreats]

Argyll,
I think one of the biggest benefits of the company IS the age of the insiders. First, many on Wall Street will discount a firm close to 30% if it is privately held. PFHO is close to that, so in a way, I believe the best way to look at an investment in PFHO is like buying into a company pre-IPO. FB and many others have stock where over 50% of the voting stock is held by insiders, so that in itself isn't something that could hold the stock back.

The reason why age is an advantage, the CEO will eventually wish to retire, whether it's 2 or 20 years or later, who knows. But the one thing is, that it will change things when that happens, which IS a catalyst. So, as Investorone said, what will happen if he decided to retire.

1) The CEO could continue to hold the stock
2) Sell stock in the market
3) Sell the company outright

#1, doesn't change a thing. His trust probably spells that out.

#2, very unlikely. Just how many shares could he sell before he had to report. There are also rule 144 restrictions perhaps that come into play. Selling would depress the price - where the price today, IMO, is already at a discount

#3, VERY POSITIVE and most likely. If I were CEO, I would find a larger buyer that would either buy us out with cash at a premium, or, merge into a larger company that could put even more capital to work and expand this business. Let's just say he could sell to CRVL. Last qtr earnings from CRVL, 41 cents, PFHO, 51 cents. CRVL could make this an acreative acquisition by paying at least $60/shr cash right now, and that is before cutting the CEO's salary or other cost cutting things. If they did a stock transaction, the CEO would likely be restricted in selling stock for a year or more as part of a standard transaction. And when he did, he would be selling into a company with a market capitilization at least 10x as large, so it wouldn't hurt.

The nice part here is that the company's management has more reasons here to grow the company faster, and do a deal. Even if that doesn't happen, for the CEO to sell, he would want the company to get listed, liquid with a split, and get noticed on Wall Street. ALL VERY POSITIVE.

Of course, if the CEO passed away, it would cause the same concern on Wall Street about whether the corporate culture would change. But even in that event, the heirs of that stock would have the same situation - that is, they would be better off selling the company as a whole, instead of dropping a few shares in the market at this rediculously already discounted price.

Look at the history of Pyramid Oil (PDO) when it was trading at 25 cents. Over 60% of that was held in a trust by the Hathaway family. Eventually, those shares were bought by the current CEO in whole, who with the past CEO turned the company around, and eventually got near $40 in a short squeeze. So it's happened before, and it's the most likely outcome.

In any event, this company is doing everything right - and if you want a company to do things, a CEO that owns more than 1/2 of the company will make things happen. He doesn't need to give himself options or a high salary because his wealth is the company. If you want a company with low insider holdings, then you have a board and CEOs that want dilutive options galore - and will do things like congress, slowly if at all through a board of directors. That is another reason why you will not be able to find another PFHO for years to come IMO.