Okay, so you want a tip on an undervalued stock? Then, focus your attention no further than to Portage Biotech (PTGEF). Now that I have you concentrating, the first step is to do the math and understand that tiny Portage Biotech owns 6,341,500 shares of a company named Biohaven Pharmaceutical Holding Company Ltd. (BHVN), a NYSE stock that closed on Monday at $37.54 a share. Now, to put that in perspective, PTGEF, which closed at just .47 cents on Monday, has equity in BHVN of roughly $238,059,910! Yes, that's correct, at Monday's close, PTGEF had around $238 million in BHVN equity, representing approximately .85 cents per share on a cash basis to Portage.

So, to make sense of it all, this tiny little company, thanks to an exceptional management team that took a roughly $7 million dollar investment and turned it into $238 million, PTGEF investors may be in line for a significant payday. Not too bad no matter how it's measured. In fact, it was an extraordinary feat of managerial expertise. And, because PTGEF trades well under most investors radar screen's, the secret is still a matter of fact to most.

What The...

Now, the ultimate value of BHVN stock to Portage is still an undervalued asset, with PTGEF shares trading at roughly 57% of its BHVN holdings. And, if that lapse of market reason does not scrape the cro-magnum knuckles, there is additional value in PTGEF through its two wholly owned companies, Portage Pharmaceuticals, and Sentien Biotechnologies, Incorporated. Although both of these assets are just now emerging, the value is certainly more than zero.

The value and distribution proposition that may be recognized from an investment in PTGEF is not far off, by the way. And, to be sure, much of the value that investors may expect to receive sits in BHVN, with a couple of potnetial scenarios playing out. Of course, much of the final distributive value rests in the price of BHVN at the time of dividend or amalgamation. But, with BHVN shares continuing to run higher with solid clinical prospects, investors may reasonably expect that BHVN management will continue to accelerate its own prospects to maintain its momentum to the upside.

How Will The Deal Go Down?

For investors to realize the value in the BHVN holdings, either of two scenarios is expected. First, PTGEF management sells its stake in BHVN and offers a cash dividend to holders of record of PTGEF stock on a particular record date. At current prices, the dividend would be roughly .85 cents based on BHVN shares held divided by a fully diluted share count at Portage of approximately 277 million shares. Certainly, that potential dividend may rise or fall with market conditions.

However, most investors see a different scenario playing out. A more likely event would be for BHVN to absorb PTGEF, which has close ties to current and former management. Keep in mind, BHVN was spun out of PTGEF, so the relationships are strong. If this scenario plays out, PTGEF shareholders may get a substantial reward by getting shares in BHVN with a value far higher than current PTGEF stock prices, and at today's valuations would bring roughly a 74% premium. Although shareholders may give up their PTGEF shares in exchange for BHVN shares, holding shares in an emerging company who has several phase 2/3 trials in progress is a fine opportunity for current PTGEF shareholders, and most shareholders appear ready to accept those terms, if such an offer is presented.

While I could go on a rampage as to why BHVN, in and of itself, is a fantastic long-term stock to own, my thesis remains simple. PTGEF, at these levels, is a screaming buy, with more value being left out of the stock than is currently factored INTO the stock. Although there is never a sure thing in the capital markets, this deal may be the closest an investor may come to being provided with a likely 70% gain in less than three months time, which is when a decision on how to distribute the BHVN wealth is expected to be made.

Full disclosure, I'm long the stock and getting longer by the day. And, although PTGEF share prices may likely continue to rise from investors taking advantage of the emerging value opportunity, consider this tip a friendly gift from me to you. For those that have followed the story, many both recognized and praised the potential in PTGEF back when it traded at .12 cents a share. To all of those investors, I say..."we done good."

Disclosure: This article was written by Kenny Soulstring, and it reflects my own opinions and unique articulation. This article is not intended to offer investing advice, guarantee 100% accurate predictions or to be interpreted as providing a personal recommendation. What I can guarantee, though, is accurate research, thoughtful analysis and an enthusiasm about any stock that I cover.

While I seek to uncover emerging companies that I feel have true value and potential, it's important that investors assign an appropriate time horizon to each of their investments, understanding that emerging companies need time to mature.

I wrote this article myself and it includes my own research and expresses my own opinions. I am not receiving compensation for it (other than from CNA Finance). I have no business relationship with any company whose stock is mentioned in this article.

Additional Disclosure: I am LONG PTGEF and may add to any positions within the next 72 hours.

Kenny Soulstring is an entrepreneurial visionary with a thirty year history developing and operating small to mid sized businesses. His experience in building a brand led to his interest in investing in small and emerging companies, and for the prior twenty years, his investments allow him to take part in new ventures without undertaking all of the legwork. Focused on finding compelling opportunities in the small cap sector, Soulstring enjoys the art of the build, watching a company develop from concept to maturity. His frequent contact with company management allows him to offer timely and relevant information, working to keep news fresh with a spicy commentary to match. Soulstring was raised in Miami Beach, Florida and plans to retire there when his hair turns fully gray.

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