In finance a security that is labelled a “special situation” is generally undergoing a perceived value changing event such as a restructuring, merger or acquisition and even bankruptcy proceedings. The situation could have positive or negative repercussions on the stock price and investors with an eye on short term gains can make a play for a return from the situation. In our opinion, the company usually needs deeper fundamental analysis in order to fully understand the situation and the opportunity, which includes assessing the range of probable outcomes. Any investment thesis that Pender acts upon has to show that catastrophic risk and permanent capital loss are unlikely outcomes of the special situation.
