RE: Dilution in POLB20 Jun 2021 20:10
And, to follow on, when someone raised a Q whether POLB would be valued only at 'cash raised', these were my thoughts :
Well, that's the thing with IP : it's a 'stranded asset' of very little monetisable worth until it has found a route to market.
POLB's IP had no , or minimal, 'carrying value' in ORPH's books , as far as I can tell. If anything, the value was in the associated tax losses.
Cash moves it along that route to market.
As the destination comes closer, you (hopefully) get a multiplier effect on the hitherto neglected IP, as the heavy discount it has at the outset is unwound by progress made as the money is spent.
If we use the 7p Scenario 1, you MIGHT see the dealings after IPO start at a premium, because investors can see a concrete way forward, for a now segregated, stand-alone business.
AFAICS, Trellus (TRLS), the EKF spin-off had its IPO at 40p and immediately started trading at 65p.
One possible valuation progression 'along the POLB journey' MIGHT be :
- IPO s/p : 7p (7p cash + 0p 'hope value');
- immediate post IPO s/p : 10p (7p cash + 3p 'hope value')
- 9 months post IPO s/p : 15p ( 2p cash + 13p 'hope value')*
* POLB has burned cash....but progressed clinical trials meaningfully.
- unlock our freebies, to allow s/p to find an 'open market' value - or , being cynical - to have a second funding round here (if IP not quite sufficiently advanced); and /or
- go to Nasdaq, where 'we' (freebies + IPO investors) would sell off 60/70/80% of the business to BigPharma, who have the big bucks to finance the IP to/through the dreaded Phase 3....
This is all very much AIUI and done as much to clarify my own thinking (and be corrected by others here for any wrong assumptions or misunderstanding on my part) as anything else.
HTH
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