My thoughts8 May 2023 10:55
Apart from the pain of the price drop, (which very painful of course), and the dilution which was also very large and unwelcome, I was not too concerned by the recent RNS's. I may be on my own here but my thoughts on the RNS's were as follows:
Litigation: Either the ATE underwriters were not prepared to offer cover or it was too expensive. Let's look at both:
Not prepared to offer cover:
The chances (in the underwriters eyes) of us winning are not what they need to be prepared to offer. Given we only had a small amount in the bank (including the line of credit), were we to lose then we might be up for Maxwell's costs.
Result = Cap-XX going bust. As the judge dismissed the summary judgement claim (big decision in my view, as Cap-XX at least appears to clearly have a case), that is less likely, however Cap-XX need some working capital for the litigation, as these costs will now not be met by the ATE underwriters. So the fund raising was inevitable.
Too expensive:
Let's hypothesise that an award could be as much as, say, AUD 30 million.
As deemed too expensive, the cost of insurance could range between 30-50% possibly. Which then costs Cap-XX. AUD 10-15 million.
If we are pretty confident of a win, the (temporary) hit on the share price and consequence dilution may be a relatively small cost relative to the possible benefits of a successful outcome.
The fundraise takes away the imminent threat of Cap-XX being vulnerable to being timed out or (more correctly) costed out by Maxwell.
The fundraise maximises the upside relative to the purchase of the ATE insurance.
Maybe they should have looked to borrow a while ago, that may have been preferable to a fund raise. Who knows, perhaps they tried and failed? but we are where we are
A surprise that AK is standing down, but 1) he remains with tte company. 2) Perhaps he is a better scientist than CEO and Cap-XX are upping their game 3) may be part of the deal with Continental.
A high stakes gamble but here's the upside:
3 X Directors have now invested a bit more into the company. Would they do it if the they thought 1) Cap-XX were going to lose the court case, 2) if sales in the future were not going to recover 3) if the couldn't see the possiblility of the company recovering share price in short to medium term.
V painful in the short term, but for better medium to longer term outlook maybe?
OR am I deluded !
Sign In
Follow the stocks
