At the end of 2020 I wrote enthusiastically about the PDL Biopharma liquidation. At the time the stock was trading at $2.35/share while I estimated approximately $3.35 in liquidation distributions. Last Friday the company paid a third distribution to shareholders, bringing the total amount distributed to shareholders to $2.05/share. While I’m close to recovering my initial investment, I think it’s clear that my 27% IRR estimate was way too optimistic. Based on the third quarter ’22 update remaining net assets are approximately $1.61/share. Even if the remainder of the liquidation is now quickly concluded, and we get that amount in one year time, the IRR is “just” 19%. If we have to wait another full 3 years, which might be more realistic, the IRR drops to 14.5%. While PDL Biopharma seems to follow the golden rule that liquidations always take more time than you expect, I think the end result will be nonetheless quite satisfactory.

Balance sheet before taking 2nd ($24.1 million) and 3rd ($95.9 million) liquidation distributions into account

Disclosure

Author is long PDL Biopharma