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PaperlinX Limited: The pain could be almost over

PaperlinX Limited (ASX: PPX) today revealed that since the company’s AGM, trading and general economic conditions have continued to deteriorate, particularly in key European markets.

No surprise there.

The company also revealed it has received an incomplete, indicative, conditional  proposal from a private equity firm to acquire the whole company. The bad news? The proposed purchase price is just $0.09 per share, a measly one cent above their share price before the announcement.

For long-suffering PaperlinX shareholders, this could finally be the end-game. I suspect many are sitting on losses of 95 per cent or even more. PaperlinX once traded at close to $6. It’s been one painful fall from grace.

Existing shareholders should prepare to log a rather large tax loss. More importantly, the lesson here is that PaperlinX operates in a highly competitive industry, has no obvious competitive advantage, earns low margins and is fighting against structural changes in its markets. It adds up to a whole lot of pain.

Investors buying today are taking a punt, pure and simple.

Rather than punting, here at The Motley Fool we prefer to focus on quality, profitable, dividend paying and growing companies. Call us naive, but we just think that’s a better route to investing success.

For investors looking to upgrade from PaperLinX, our free special report — “The Motley Fool’s Top Stock for 2012“  — highlights one such company. Grab a free copy of that report by clicking here.

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