9342-8530 Quebec Inc DGCRF

What can Bordeleau do?

[RetailRube]

I speculated in my last post on how to resolve the PCA3 revenue growth inhibitors.  Solving this problem is the biggest lever that Bordeleau has on the stock price.

But what else could he do?

He could cut expenses by laying off all employees except for the Controller and one scientist to maintain the patents.  That would leave them with a business with about $600 thousand revenue and maybe $300 thousand expenses.  With only $300 thousand profit, market cap could be about $3m (0.3m income x 10 p/e).  But that is only 7 cents per share, so that won't work.

He could sell GCC.  That has attempted for a year now.  CM was leading that effort.  But she resigned in October.  She resigned.  She was not laid off.  I deduce that from the CFO job she started in October according to LinkedIn.  I am worried that nobody wants to buy GCC and she gave up.

He could try and sell PCA3 royalty rights to HOLX so they could sell it on to a third party as a clean package, royalty-free.  But if I were HOLX, I would ask CUR to redeem the 4.9m Preference Shares that I hold in CUR.  These are valued on the balance sheet in CUR at $5.9m.  So negotiating with HOLX won't net us much cash.

He could try and sell the PCA3 royalty stream to a third party.  But again, that would leave us with no income stream, only cash in the business.  So we would have to wind up CUR.  On wind-up, employees get paid first, then the pref shares get paid in full, then the common shareholders get paid with whatever cash is left.  Severance for 13 employees who have been with the company a long time (CUR was founded 20 years ago), assuming 2 weeks pay for every year of service, totals $1.6m.  Cash on hand at the end of December 2013 is approximately $4m.  Deduct $1.6m for employees severance and $5.9m to redeem the pref shares, we are left with negative $3.5m of cash.  We have to sell GCC+PCA3 businesses for at least $10m in total to yield todays stock price of 15 cents per common share.

In summary, Bordeleau has few options and they don't look great.  I think the best option is to lay-off the employees and wait for PCA3 to start growing.  Since HOLX just started a strategic review to optimize and rationalize its business, they will be distracted for at least a year.  Then they can start working on growing PCA3.

I sympathize with m. Bordeleau.  Hopefully he can think of something I can't.