Investor Just Can't Quit Palm

Updated from 11:54 a.m. EST

SAN FRANCISCO -- In for a penny, in for ... billions of more pennies.

Palm(PALM Quote) announced Monday that sugar-daddy investor Elevation Partners, which bought a 27% stake last year in the struggling smartphone maker, has re-upped with another $100 million cash infusion.

Under the agreement, Elevation will buy new preferred shares that are convertible into Palm common shares at $3.25 each. Elevation also gets warrants to buy 7 million common shares at that same price.

Palm shares shot more than 17.3% higher in Monday afternoon trading to $2.92, and they are now off the deck of a scary 52-week low of $1.14 set earlier this month.

Elevation's latest stake isn't a complete surprise. As Robert Holmes reported last month, Elevation strongly refuted an analyst's report that the firm was giving up on Palm, with Elevation managing director Roger McNamee saying bluntly: "We have a very long-term investment horizon and have no plans to exit our investment in Palm."

A perfectly logical two-part response from investors would be a) why not?, and b) would you mind terribly if we watch from a distance?

The economic realities for Palm are bleak on many fronts. Even disregarding the huge tax allowance that threw a half-billion dollar loss on the books for the second quarter that Palm reported last Thursday, the company still had an operating loss of $77.5 million on revenue of $191.6 million, which was down 45% from a year earlier.

For the latest six-month period, Palm has posted a pretax loss of $140 million.