RE: Reality check needed3 Sep 2021 08:45
If it could just conquer the 1.8 treshold and hold it until the FY21 report, so we can move on from there, I will be happy (for september results)!
I am also still trying to explain the sub2p level to myself sometimes (see previous posts for attempts). The tricky question is to estimate how good a deal the bondholders made buying out 91% of the equity for cancelling parts of the debt? Obviously, only time can really tell.
However, if the deal was “neutral” i.e. adding the same amount of value in cancelled debt as was subtracted in the substantial dilution of existing shares; then the enterprise value (debt+equity) should be a valid measure.
Another good reference, as mentioned by many here, is future free cashflow.
But either of these standard measures of value point to the conclusion that PDL should be worth 2-3 times as much right now.
SO, subtractors must be factored in. Here are three suggestions that come into mind:
The obvious one is former bondholders flooding the market with unloading their “risky shares” to get cash and balance their loan business balances. This will have a natural end, when they run out of shares to sell, and as I mentioned, more than 2 billion shares have already changed hands since the March conversion.
Number two, could be market bias and unequal distribution of information. As and when the company reports new results, it will erode this bias. We witnessed that after the lavest presentation 21. July, and I believe the FY21 this month and 22Q1 sales report in October will have a similar effect.
Finally (for now, you can continue this list yourselves ;-) a lot of large investors will not buy shares from a company with a ****ty credit rating. So, like Moodys said in their last report: PDL has a poor credit rating, but a positive outlook, but when the earnings get to at least 1.5 times the interest this barrier too will dissappear.
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