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  Pantorama's performance is slack, so is the trading

BENJ GALLANDER and BEN STADELMANN

Friday, June 20, 2003

Back in 1999, one of us made a side bet outside the Contra portfolio on Pantorama Industries Inc. This retailer of casual clothing was coming off a year in which revenues were $155 million and income was a tad under a million bucks via 212 stores. The outlets included a veritable Who's Who of fashion: Levi's, Roberto, Guess, Vintage Blue and a few others.

The reason that the outfit was not a Contra stock was the dull trading activity. Sometimes there would be absolutely no action for more than a week at a time, and a "crazy" day might see 10,000 shares change hands. To call the stock illiquid would be polite.

The purchase took almost a month of bidding, with the stock finally acquired at what appeared to be a bargain tariff of 81 cents a share. Until then, the stock had never traded below $1.35 during the 1990s, and twice during that period it had risen as high as $4.40. This looked like a profitable contrarian situation.

Wrong! While the stock did jump sporadically, most of the activity has been negative. Revenues dropped annually -- in 2002, around $121 million. Most years have been marginally profitable, although the last was a loser; the stock price reflected this fact, dropping as low as 16 cents.

With the investment skidding toward oblivion, half a dozen calls were placed to management. Ralph Fragomene, the vice president, finance and operations, was first on the hit list, since he is designated on corporate press releases as the contact person "for further information." There must not have been any further information; he didn't respond.

Calls were also placed to Sydney Aptacker, president and CEO; Robert Wexler, chairman of the board; and Larry Wexler, executive vice president and COO; all to no avail.

Perhaps the gents in the corner office (except for Ralph, whose salary seems reasonable given that he has not been paid a bonus the past three years) were too busy rationalizing their bonuses over the past three years to speak with us. These ranged from a low of $369,000 to $501,973 per year, on top of salaries of $300,014.

While these tallies are not as rich as they are for many top brass, forgive us for asking a question: Aren't bonuses based on positive results? Oh, there we go, wearing our "simple" caps again.

What does one do with a corporation whose management refuses to talk, with a stock that doesn't trade for weeks at a time? While the bid and ask prices vary somewhat, the spreads are normally huge -- they recently sat at 26 and 44 pennies respectively.

Dumping the position to take the tax loss would drive the share price to Hades. Sitting and hoping for a return to previous form would be like asking Funny Cide to serve at stud.

We tried this approach: a bid to buy was placed at 16 cents, while an offer to sell was made at $1.12. Both were near the front of the queue because so few shares are sized in the marketplace. If a few people decide to dump, the position will effectively be averaged down. If the company erupts with good news, the shares could sky quickly.

Unfortunately, these bookend offers remained standing after being in the market for a few weeks. The situation is akin to being caught with a pair of trousers with one leg on and one leg off when the phone rings with that important long-distance chime. Do you race to finish dressing? Do you strip? Or do you try to wheedle over, leg in, leg out style? Maybe dancing is the solution. The peg-leg, anyone?


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