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Re: no2koolaid post# 152586

Wednesday, 04/29/2015 3:56:22 PM

Wednesday, April 29, 2015 3:56:22 PM

Post# of 403134
N2K, I HATE the idea of merger with Epic.

Such a merger would provide the easiest means of screwing ELTP shareholders. Your posts this week on valuation have been very enlightening, and they cause me to recall this:


http://ir.elitepharma.com/profiles/investor/ResLibraryView.asp?ResLibraryID=74676&GoTopage=2&Category=2163&BzID=2258&t=1948&G=939

Elite monetized its minority ownership interest in Novel Laboratories this quarter, receiving $5 million and recognizing a related gain of $1.7 million.



There was quite a bit of speculation prior to the announcement that the Novel payout would be in the range of tens of millions. But Novel being a private company with closed books, it was all speculation, and in the end, it was not even close. Shareholders never saw any details, and we have to trust that we were properly compensated for our stake. The final deal was probably hammered out by the two principles over a fancy dinner and a bottle of fine wine. I'm certain that many extrinsic factors were considered beyond valuation, including quick payout and avoidance of litigation. My suspicion is that we probably got less than we deserved (but not a lot less). My point is that our stake was worth what the big players privately decided it was worth and only somewhat based on "valuation".

Now let's say we enter into a merger with a similar privately held corporation. Epic's books are closed to ELTP shareholders, but ELTP's books are wide open. And not only that, but the Directors of each entity are so incestuous that whatever the big players privately decide will surely be approved by both BOD's. If we entered into some type of merger next week, Epic's valuation based on current revenues would dwarf ELTP's, and the merger would go down 9:1 with ELTP shareholders being diluted out 10 fold. But we all hold ELTP shares because we think revenues will increase by hundereds of multiples over the next 10 years. By 2025, the revenue asymmetry would be reversed, and it would be Epic shareholders enjoying the dividends of ADF revenues. Why would Nasrat Hakim go for any such deal? Well, I don't know what his deal is with Epic, does anybody?

And by the way, who says such a merged company would be a publicly-traded company? Why couldn't the two BOD's agree to merge and go private. Pay off ELTP shareholders at a premium price of 0.30? How disappointing would that be?

No doubt, I'm more paranoid than the average bear. Downright cynical maybe. I firmly believe that corporate finance is rigged against retail investors, and in a merger with Epic, there are too many easy ways to screw ELTP shareholders. You can probably tell I've thought about this before, and I actually consider Epic to be one of the greatest risks to my ELTP investment. Epic may have saved this company, but they have already been handsomely rewarded for their money and risk with shares and warrants that may be worth billions. And if they had a mind to, they could walk away with the whole prize.

No way. Keep Epic on their side of the fence.






"There are three kinds of lies: lies, damned lies, and statistics."

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