| 12:12 ET NorthPoint Communications (NPNTQ.OB): 0.175 +0.026: Seldom will we write about bulletin board penny stocks that are in Chapter 7 liquidation proceedings, but this one has an interesting twist. NorthPoint declared bankruptcy in March after its planned acquisiton by Verizon (VZ) fell through. It later sold all of its physical assets to AT&T. So why would Jonathan Gallen of Pequod funds have acquired 9.7% of this company? In an SEC filing yesterday, Gallen says that he "believes that the Company's principal asset is its interest in the litigation...of NorthPoint Communications Group, Inc. et al. v. Verizon Communications, Inc. et al., which is pending in the Superior Court of the State of California, City and County of San Francisco." After the failed merger, NorthPoint sued VZ for $1 bln. Verizon claimed that that "material adverse changes" in NorthPoint's business allowed it to terminate the agreement. With the company's shares now valued at about $23 mln, it's clear that most investors don't hold out much hope of NorthPoint winning a verdict of $1 bln or anything close to that amount. Jonathan Gallen is obviously betting that at least a partial court victory is a great enough likelihood that it's worth a gamble. And this is a gamble of course. With its physical assets already sold, NorthPoint shares are worth zero or very close to it if the Verizon suit fails, so anyone making this bet had better be prepared to lose it all. Gallen's gamble is also notable for Verizon shareholders. A verdict of $1 bln against VZ would be a painful blow for a company that listed $1.6 bln in cash and short-term investments as of Sep 30, 2001. Most investors won't and shouldn't choose to play this court case, but it will be interesting to watch. - Greg Jones, Briefing.com |