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Pacific Ethanol, Inc. (PEIX): Michael Lau’s Candlewood Investment Group Bought More Shares

Michael Lau’s Candlewood Investment Group purchased more than 26 thousand shares of Pacific Ethanol Inc. (NASDAQ:PEIX) on February 11th at prices below $3. These purchases were perfectly timed as the transactions yielded a 40+% gain for the $2.5 billion New York based hedge fund.

The purpose of Candlewood’s transaction in Pacific Ethanol Inc. is summarized in the filing as follows:

“The Reporting Persons became beneficial owners of more than 5% of the outstanding Common Stock in connection with the Aventine Purchase, when the Reporting Persons received shares of Common Stock, as well as shares of Non-Voting Common Stock, as consideration for their ownership of Aventine.

The Reporting Persons believe that the public markets, which represent only a small portion of the ethanol industry’s ownership profile, currently undervalue the Common Stock of the Issuer (the “Securities”) based on transactions in assets comparable to the Issuer’s assets. The Reporting Persons believe that, in light of Issuer’s substantial asset holdings, certain of which are currently unencumbered by debt (based on the Reporting Persons’ review of the Issuer’s public filings), and potential strategic interest in other ethanol related production assets, there are transactions that the Issuer can engage in to improve shareholder value. The Reporting Persons intend to engage in constructive dialogue with the Issuer’s Board of Directors and third parties regarding various strategic alternatives including, but not limited to, capital structure optimization, asset monetization or a sale or merger of the Issuer (including, without limitation, transactions that would cause the Issuer to cease being a public company).

In addition, subject to a number of factors, including the market valuation of the Issuer, changes in market or industry conditions, other investment opportunities and capital available to the Reporting Persons, and the availability of Securities at prices that would make the purchase or sale of such Securities desirable, the Reporting Persons may endeavor (i) to increase or decrease their respective ownership in the Issuer through, among other things, the purchase or sale of Securities on the open market or in private transactions on such terms and at such times as the Reporting Persons may deem advisable and/or (ii) to enter into transactions that increase or decrease their economic exposure to the Common Stock without affecting their beneficial ownership of shares of Common Stock.”

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Candlewood Investment Group controls 26% of Pacific Ethanol’s shares. Renaissance Technologies, Marshall Wace, and D.E. Shaw were among other hedge funds with positions in the stock at the end of December.

The details of Candlewood’s filing can be found below:

Ownership Summary Table

Name Sole Voting Power Shared Voting Power Sole Dispositive Power Shared Dispositive Power Aggregate Amount Owned Power Percent of Class
Candlewood Investment Group 0 10,129,908 0 10,129,908 10,129,908 26.0%
Michael Lau 0 10,129,908 0 10,129,908 10,129,908 26.0%
David Koenig 0 10,129,908 0 10,129,908 10,129,908 26.0%
Phil DeSantis 0 10,129,908 0 10,129,908 10,929,908 26.0%
Jonathan Weiss 0 10,129,908 0 10,129,908 10,129,908 26.0%
Candlewood Investment Group General 0 10,129,908 0 10,129,908 10,129,908 26.0%
Candlewood Special Situations General 0 9,889,141 0 9,889,141 9,889,141 25.4%
Candlewood Special Situations Master Fund, Ltd 0 5,783,759 0 5,783,759 5,783,759 14.8%
CWD OC 5 0 3,127,913 0 3,127,913 3,127,913 8.0%

Page 1 of 14 – SEC Filing


Washington, D.C. 20549




Under the Securities Exchange Act of 1934

(Amendment No. 2)*



Ethanol, Inc.

(Name of Issuer)

Common Stock, $0.001 par value

(Title of Class of Securities)


(CUSIP Number)

Janet Miller

Chief Operating Officer and General Counsel

Candlewood Investment Group, LP

555 Theodore Fremd Ave., Suite C-303

Rye, NY 10580


(Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications)

April 7, 2016

(Date of
Event Which Requires Filing of this Statement)



If the filing
person has previously filed a statement on Schedule 13G to report the acquisition that is the subject of this Schedule 13D, and is filing this schedule because of §§ 240.13d-1(e), 240.13d-1(f) or 240.13d-1(g), check the following
box.  ¨

Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Section 240.13d-7 for
other parties to whom copies are to be sent.

* The remainder of this cover page shall be filled out for a reporting persons initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information
which would alter disclosures provided in a prior cover page.

The information required on the remainder of this cover page
shall not be deemed to be filed for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended (Act) or otherwise subject to the liabilities of that section of the Act but shall be subject to all other
provisions of the Act (however, see the Notes).

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