Wino115 wrote: I think today we've moved from Bargaining to Depression on the seven stages of grief. We have successfully passed Shock, Denial, Anger, Bargaining and are Depressed moving to Testing Solutions and finally Acceptance by week end. Let's get there constructively!
Let's try to conclude a few things, if I may.
1. The BOD and Management are risk averse when it comes to financial issues, especially dealing with capital markets.
2. The level of skill on the Board and Management in dealing with bigger league investment banks and markets is still underdeveloped. A while ago, I suggested they desperately need some US banking/biotech/venture cap based Directors who could provide introductions to key players here. They clearly skipped over the entire rationale for the NASDAQ listing, thus reinforcing the provincial Canadian background. This was a big mistake and possible evidence of the lack of experience or fear of entering the big leagues. Not that a bulge bracket would have done something this tiny, but there were plenty of US names that could have done it.
3. Looking at the tea leaves, we should have seen this coming. We knew there was a deadline for getting the financing in place prior to the Phase 3 or shortly thereafter. We are risk takers. But I do recall SPCEO posting their reaction to announcing the move away from HIV NASH to full NASH as utter disbelief. Clearly now they thought that would provide a nice steady pop and the concern seen in them about financing and mentioned was heightened starting then. As soon as the secured the Phase 3 go ahead, they releaseed it and hoped for the best. They clearly had banks that knew them lined up for this all the way back in the summer. They didn't want to have to go through another due diligence program with a new bank to underwrite it in the US. It would have taken too long and they didn't know the company. They were forced to use the same old tiny Canadian brokers in order to have speed.
4. Could they have developed a kick-ar$e Founder order in there to help sell it. That would help, but if so they would be telling that to all the Mackie, NBF and Cannacord buyers in some way or another ("...we have a smart-money anchor in there that we can't disclose, but you'll want to be part of what they do...smart biotech guys, etc..."). Canadian markets have very loose-lips around deals and none of us heard this yet. This would have also been a chance to add a lot of credibility. It may still come to pass and they have kept the anchor completely shielded. That would be the optimistic scenario because they want to keep adding and will disclose when they hit 5%. I put low probability on that, but not zero. Even if the client requested anonymity, someone up there would have spilled the beans on the type of client it was without mentioning a name. We haven't heard that though.
5.
I do not think this shows a lack of confidence in either program at all, but shows classic corporate prudence. Especially prudence at the Board level -- no one wants to ok a huge investment program and not actually have the money to pay it. That is not considered good governance. It would be no surprise that with the FDA greenlighting it and cancer, they had to seek BOD approval for the capital expenditures and the quid pro quo was, go get the money if you want us to approve this. That's prudence. We don't like it, but that Board (which represents shareholders) won't want to be subject to any legal ramifications if things got off the rails. With the upping of the program patients by a few hundred (to 900 now), the costs went up. They did not have the full discretionary cash flow for that or to pay off the convertible. Management will want to know they have the cash for both. So you could say this is the opposite of questioning the programs -- they are gung-ho to push ahead and we have never seen them be anything but unbelievably positive based, not on opinion, based on the facts from the trials, the scientists, the KOL advisors, and the clinical lab data. The other way to state it is, they are so positive that they want to make sure they have the money to get it done. But they also know while they are positive, there's a 50% change the oncology needs reworking and probably a 50% for NASH according to thost stats we've seen. So despite their 100% view that they plan to prove them both up, they have to use a 50% chance in thinking through the funding. That realistic chance of bad to middling news and a volatile market and no new banks to talk with forced them to use Canadian small timers and take what the market is saying is the fair value, regardless of what we think. Could they have waited and done it better, thus less dilution? We'll only know in time. We say yes. They say maybe. But they are responsible for running the company prudently. We can walk away. I can't believe they are happy with the price, except if it's brought credible investors in to it. But it's a realistic price given how "the market" views them. On the bright side, they appear to have done the absolute minimum dollar wise to fund them for the 3 and maybe 4 years. If they do this right, perhaps this will be their last capital raise. That could be the case depending on how things develop.
So it's really about corporate governance, risk aversion, still lacking capital market contacts and sophistication (they desperately needed a US financial or biotec investor type on their BOD), not having the time for a new bank to do due dilly, and feeling pressure after the boost they thought they'd see back in the summer never materialized. I wouldn't underestimate the latter given SPCEO's comments back then. He said they were flabergasted it didn't move substantially up. I'm sure in their mind they hoped to hit the $3-4 level with that and then the $5-7 level with the Phase 3 OK. Instead it got puked down in tax selling because it's illiquid -- down to $2 and the news slowly brought it back to above $3 finally. They looked at the percentage change --up 50% -- and said, wow --let's hit it fast. We look at it as 50-100% below where it shoudl be or a fair value if they hit the road and pitch it AND have cancer indications in there. We have a different perspective.
SO -- I think we can all understand this now and let's grieve. We are pissed at the extra 15-20% dilution we thought could have been avoided. In time we'll see who was right with that calculation. We are definitely pissed they still haven't jumped from the small time provincial Canadian company to the global stage of NASDAQ and the huge biotech investment crowd in the US. Let's just constructively hope they will see that now, they see what it has cost US -- and them with their options -- and correct it via BOD or a more connected CFO with US and biotech background. Visibility is something they still need to keep pushing. So far it's not really succeeded but we'll see once they have actual factual value-enhancing rationale if their trials come though or the reality of being a NASH P3 player soaks in to the market view.
The positives are the financing is a non-topic for 3 years now and they can devote 100% of their time to assuring they suceed with their pipeline and new marketing initiatives. We will get to Acceptance (but still in a p1ssed off prove-you-love-me mood) in a week and will likely not forget their poor capital market strategy and treatment of large shareholders and long-term shareholders.
By the way, I have been on a board for a public company before. It's a lot of work....
JayjayUSA12007 wrote: SPCEO:"But if shareholders generally agree something needs to be done, and I am not sure I am even in that camp yet, then the votes will be tallied, changes will be made and new board members will chosen who likely would be better qualified than me anyway."
Definitely, something needs to be done. I will vote for Wino115 to be member of THER BOD.