Three thoughts on the rights offerThanks, GoBBs for your kind words. I agree. :-)
Three thoughts about the rights offer.
1. I know that some people worry about the new shares participating. This is highly unlikely, imo. In their April 15 PR, the company already estimated the final share count after the rights offering would be at 25B and how these shares are distributed (SLAP 16.6B, Consonance 3.3B and the rights offers+ original=4.9B).
I don't think that SLAP and Consonance needs more than what they have after pp and debt conversion. For their purpose, they own enough shares, w/o putting in more money.
2. Even if I was wrong and Consonance does take part, which will make the least amount x1.2 (=4.9B/ (3.3B+736M), instead of x6.7, it is still not nothing.
Furthermore, the sp is very likely to go down (near 1.521 cents) once the Record Date is announced (not unlike the dividend situation, imo).
So for the near term, before the good news (which I don't imagine will occur before R/S), the sp may trade very low (near 1.521 cents). Then if this is indeed the case, what you can not buy enough in the rights offer, you can pick up more in the market.
3. There may be another opportunity to buy cheap shares for the purpose of averaging down. The biotech stocks are usually more volatile on the news/day of a R/S, and it is possible that this stock will trade very near or even below the $380M market cap, which mean that the sp is actually cheaper than 1.521 cents (pre-R/S).
Thus, there are more opportunities to buy cheap shares, imo, than worrying too much about whether or not Consonance will take part in the rights offer.
The practical thing, imo, for the existing share holders is to keep an eye on the AMF development, but at the same time decide if one will buy the rights offer.
If yes, then one need to get prepared (e.g. raising money or sorting out the details of how to do so in the registered accounts etc).
The company is set to go on and now as SALP is the new majority owner, I expect them to be much more prudent with the burn rate and the equity value of the company than the previous management/BOD under Pierre.
What everyone needs to decide soon (if not already) is whether or not they have other better investment opportunities that they rather put their investment money.
If not, then the prudent thing is to see this investment through, imo.
Of course, the risk of not working out is always there, like every investment.
However, the potential is there also that for those who stay, they will come out all right or even profitable in due time, if the company does succeed eventually.
Cheers, CC