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Hmmm...
from Supplemental Information - SHARE ISSUANCE HISTORY AND DILUTION published 3/16/22
https://www.otcmarkets.com/otcapi/company/financial-report/323613/content
Another thought regarding the structure of the transaction. It's my understanding that for a merger, ie a legal combination of two companies into one, the new owner will generally be responsible for liabilities of the acquired company, including pending lawsuits.
But if the acquisition is structured as an asset purchase, the transaction is only the purchase of specific assets of a company, and the new owner does not acquire the liabilities of the acquired company unless they specifically agree to do so.
Similarly, in a "sale free and clear of all liens and encumbrances", the buyer of the assets is not responsible for the debts of the seller, unless they specifically agree to assume those debts in the purchase agreement. I believe the seller can then theoretically go bankrupt to avoid repaying its debts.
Share structure of SAGA is in their 5/22 10-K:
https://www.nasdaq.com/market-activity/stocks/saga/sec-filings
I highlighted share classes and OS/AS totals this morning before the PR hit. There's two classes of Common shares (only one traded on Nasdaq), a Preferred class with none issued, and approx $137M of "common stock subject to possible redemption" (ie 12,456,337 additional Class A common):
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172309657
If ENZC solidified the merger and then shocked the market with amazing news, ENZC shares might be the cheapest path to SAGA shares because of the dividend deal. Not holding my breath, but it's within the realm of possibility. As is SAGA delisting back to OTC before dividend shares leave a lock-up period, if ENZC can't deliver cures.
The PR used example numbers.
The proposed non-binding business combination is not finalized.
If there's no money set aside to fund VIRO and BGEN operations SAGA will need to raise additional money somehow. If operating money is instead allocated from the sale, then the example in the PR is oversimplifying the transaction.
Do ENZC's preferred shareholders also get a dividend?
Is there a lock-up period for SAGA dividend shares?
Only ENZC Preferred C and D are currently listed as actually having dividend rights. Common is explicitly listed as not having dividend rights.
What happens to SAGA share price when everyone gets their dividend and wishes to take profit?
There may be a play here, but there are still unknowns and risk. I'm a little surprised the share price isn't rising on speculation though. Your math checks out based on the example numbers in the PR.
In the example scenario using example numbers, ENZC would temporarily be 90 percent owner until it could issue that equity to its shareholders as a dividend. The value would flow through ENZC but not stay with ENZC.
The way I'm reading it, ENZC would retain its value in the interim by owning most of the equity of SAGA, until ENZC distributed dividends, assuming regulatory approval for dividends. Make-Whole provision would protect ENZC shareholders if SAGA loses value between now and then, because additional shares could be issued in 6 months to ensure the SAGA deal retains $450M of total value.
Whenever the dividend would happen, ENZC shareholders would own their proportional amount in SAGA shares, ENZC would hold no more equity in SAGA and all of VIRO and BGEN, plus IP and licensing, would belong to SAGA. ENZC would be left with its ticker, its lawsuits, its undeveloped subsidiary RobustoMed, and would probably need a new management team since the current team has announced new roles at SAGA.
Outstanding post, thanks!
Some positive and exciting possibilities. It'd be awesome if it could play out that way.
I'd note that Gaurav Chandra, Charles Cotropia, Joseph Cotropia, Suraj Saggar, and Kirsten Bischof would all have new roles under SAGA, according to this PR. I'd be surprised if they're able to split time with ENZC. How would that benefit SAGA? What IP would be left to work with? Today's PR suggests ENZC would still try to find a use for RobustoMed.
A point I'd like to see clarified is that ENZC says "There is no dividend, or preemption rights with common equity" in its OTC filings, but they tease issuing dividend shares in the PRs. Today's PR does use the phrasing "intention to declare a dividend and subject to and upon approval by the regulatory entities". Only Preferred C and D are currently listed as actually having dividend rights. It seems like ENZC would need to amend its class definition for common, unless 'no dividend rights' still permits issuing a dividend to common shareholders in a business combination scenario, or in goodwill. Maybe somebody with more experience can weigh in. And this is not necessarily a problem, just a technicality to note.
I think the math checks out, and I agree it's unrealistic to assume a 1:76 dividend, though the example in today's PR suggests that's how it might work. I thought I had enough disclaimers, but the point was it shouldn't be better than 1:76 ish in the perfect case, and likely nowhere near that strong a rate.
VIRO and BGEN need operating cash. SAGA shareholders are entitled to additional shares in a business combination scenario. ENZC preferred shareholders may get shares. Other unmentioned parties may get shares. Some cash/shares might be set aside as equity for later. The valuation is actually $10 per share of SAGA, not $12 like I used in my example. All of this is part of the $450M "value" of the proposed transaction; ENZC commons aren't the only ones to be accounted.
I'd expect a dividend rate lower than 1:76. Once the dividend rate is known, I'd expect ENZC share price to equalize quickly. If the SAGA deal closes, I'd expect ENZC's share price to plummet, since ENZC's IP, progress, and management team will have moved to SAGA. However, todays PR clarifies ENZC would still be looking to exist as a company, own most of SAGA's equity initially, and craft a new business strategy for RBMD -- so I don't see ENZC's ticker going to zero.
Hopefully the dividend is high enough ENZC shareholders don't lose any value during the transition; and in fact the Make-Whole provision is very promising; they might still find a way to profit from their ENZC shares; and the SAGA shares may or may not be locked in for a year or two before they could be sold. Probably some decent plays here, but not without risk.
Great post, good questions and insights.
Maybe, but that means traders of just 1% of the float can keep this from moving higher.
Well,
We're left to guess whether SAGA would get the ITV-1 exclusive license, most of ENZC's management team, and any future profits from a big chunk of ENZC's flagship tech. (Notes) Investors might be keeping their powder dry for the SAGA ticker.
Alternatively, if the SAGA deal falls through, big question marks whether ENZC would try again with another SPAC, or be able to proceed with plans for Biogenysis and Virogentics in the interim without raising significant operating cash.
High uncertainty, nobody wants to hold a bag. In the meantime, there's been sell pressure from bears, shorts, maybe Savov, maybe the company.
All very good questions.
Add the exclusive license agreement for ITV-1 to your list. I assume that would also transfer to SAGA. ENZC couldn't collect royalties or licensing fees because the patents are owned by The Zhabilov Trust.
From what I can see, ENZC would either get $250M cash to fund whatever it could do with RobustoMed, BioClonetics, International Medical Partners Ltd, and to cover its liabilities
Or some amount of equity in SAGA to be able to profit alongside SAGA which someday earns revenue from Biogenysis and Virogentics, assuming the tech is profitable. This second possibility might be better for ENZC shareholders since it could create ongoing value for ENZC.
Keep in mind Gaurav Chandra, Charles Cotropia, Joseph Cotropia, Suraj Saggar, and Kirsten Bischof would all have new roles under SAGA as well, per the recent PR. Will they have any capacity to also continue work for ENZC?
I would think SAGA would want their services full time, and exclusively, to avoid a conflict of interest. What would that mean for ENZC?
You may be on to something,
I previously did the math here and concluded There haven't been 71 million shares moved from unrestricted to restricted, OR there have but more restricted have simultaneously been issued.
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172018251
I overlooked that indeed 50,000,000 new restricted were issued on 3/31 for Valentin Dimitrov's Series E conversions. (Page 7) So the math could be:
451,289,565 restricted reported December 31, 2021
- 71,000,000 for Savov settlement
+ 50,000,000 for Valentin Dimitrov
- 29,926,380 for other parties (or some of Dimitrov's became unrestricted since 3/31)
= 400,363,185 restricted reported as of 5/30
To clarify, although the total unrestricted shares increased significantly in the last few months, total restricted stayed nearly the same. Another way unrestricted shares might increase is to issue new shares directly. For example if the company was diluting.
Consider the numbers here:
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=172017449
The total unrestricted increased by 77,094,580 but most likely only 16,726,400 of those came from restricted becoming unrestricted. The other 60,368,180 are likely brand new and went directly to unrestricted.
Restricted as of 5/30 is reported at 400,363,185 shares. Savov's disputed 71 million were still part of the 451,289,565 restricted reported December 31, 2021. That's a difference of only 50,926,380, so any of these scenarios is possible:
- Savov got up to 50,926,380 shares moved to unrestricted per a settlement
- Other parties moved up to 50,926,380 restricted to unrestricted
- Bigger changes happened, but the company simultaneously issued more restricted and kept the total count steady. (Unlikely imo)
Savov's shares were restricted according to this PR:
https://www.otcmarkets.com/otcapi/company/financial-report/323613/content
They could be getting ducks in a row in anticipation of releasing news. Nobody knows.
Color me skeptical though!
Here you go:
https://www.otcmarkets.com/otcapi/company/financial-report/323613/content
Makes sense. It'd be logical for them to take advantage of the recent buy pressure to unload shares, if they chose to dilute.
Keep in mind the numbers changed after the 19th. Open on Monday the 22nd was already at .0639 and I don't think there's been enough cumulative volume to get close to unloading the new Unrestricted shares. (Assuming they're being sold.)
OTC Markets numbers updated:
Previously:
Outstanding Shares 2,910,435,953 05/19/2023
Restricted 417,089,585 05/19/2023
Unrestricted 2,493,346,368 05/19/2023
Currently:
Outstanding Shares 2,970,804,133 05/30/2023
Restricted 400,363,185 05/30/2023
Unrestricted 2,570,440,948 05/30/2023
60,368,180 new shares outstanding
16,726,400 decrease in restricted shares
77,094,580 increase in unrestricted shares
Could it be possible ENZC gets paid in equity? (shares in SAGA)
https://www.investopedia.com/terms/c/cross-holding.asp
I saw a discussion circulating on Twitter about ENZC's claims that it owns the patent rights to ITV-1.
The issue is that these two company statements appear to contradict:
SAGA self describes as follows:
Are you referring to the loan on Page 9?
https://www.otcmarkets.com/otcapi/company/financial-report/371665/content
That shows a maturity date of 11/1/23, and Conversion Terms from the table says "Converts into 14,000,000 shares." Imo 14 million (if ENZC's accounting is right) shouldn't have a huge impact since O/S is already so high.
I also see a loan mentioned on page 42 with the same cash value and completely different dates. :P
For perspective, approx 511 million shares have been traded after April 19.
OTC Markets numbers for float are out of date by over a year. But A/S, O/S, Restricted and Unrestricted are up to date through May 19th. It looks to me that volume since April 19 has mostly happened using existing float.
Some kind of status, even just saying "we're still negotiating" is what I'd expect to see if they miss the date from their own PR.
They did update us on the 16th:
Insiders have until October to exercise stock options.
At first glance I don't see any new info about the SAGA deal in the latest OTC filing.
The numbers for Series E preferred changed. Last filing (period ending December 31, 2022) there was 1 shareholder and 5 mil shares outstanding, now (period ending March 31, 2023) there is blank (0?) shareholders and 0 shares reported outstanding. Extrapolating from the 10 votes per share, perhaps these were converted 1:10 to 50,000,000 common. Indeed this is the case, per Page 7. Converted to common for Mt. Rose Corporation V. Dimitrov. They were restricted shares as of this reporting period, but may have become unrestricted since then. As of December 31, 2021 there were 451,289,565 restricted common shares, and as of 5/19 there are 417,089,585 restricted, showing a decrease of about 35 million. So I would assume either some of these series E conversions were made unrestricted since 3/31/23, or more likely some of the restricted shares issued pre-2022 became unrestricted.
I'm not seeing traceability for Series F Preferred. Page 47 says "Year ended December 31, 2022 During the year ended December 31, 2022, the Company issued 2,500,000 shares of Series F Preferred Stock for $1,000,000." but Page 3 shows 0 outstanding.
It's not new news, but good to see lots of positive developments listed in Subsequent Events at the end of the disclosure.
If they had a lot of shares to unload fast, maybe they were dumping all the way up and all the way down. Big flood of incoming money keeps price up; the hype subsides; then the continuing strong sell pressure takes the floor out.
I'm counting approx 350 million shares traded since 4/28. If approx 100 million shares became Unrestricted in April, maybe those are among the shares being sold. Perhaps ENZC is selling some of that 60 million it recently added to O/S as well.
I'd expect to see this bounce soon as flippers rebuy in anticipation of a correction upwards. The sell pressure has been unusually strong this time (from what I see on charts) and RSI is lingering near oversold on the hourly. The late filing & not having clarity yet on the SAGA deal is helping the bears. For now, popcorn.
Good question.
That's a really interesting idea.
Maybe this?
https://investorshub.advfn.com/boards/read_msg.aspx?message_id=171913131
Thanks for responding. A couple things:
Less skin in the game. If folks chase tickers that run, and don't even know why, they seem less likely to stick around if another ticker then runs.
Though hopefully a few of them like what they see here. :)
That'd be awesome. Here's hoping! :)
I'm thinking we see a pullback, but there's still a lot of hype for mid-May so there's probably some gains left later. Been seeing lots of twitter folks who bought shares for the first time, then asking everyone else why it's running. (Those are the ones who might let go of shares.)
Circled a couple cooldown indicators below:
Bottom left is VolumeZoneOscillator which tries to measure how far off equilibrium buyers or sellers are willing to trade. Buyers backed off and there's some added sell pressure.
Second from bottom right is CCI which measures price direction. It's not perfect by itself but if it agrees with other indicators it can sometimes tell us something. The interpretation is crossover from outside the top band indicates likely continuing downward price movement.
Bottom right is AwesomeOscillator which sort of measures the lifespan of an uptrend or downtrend. This is descending red but it's curving up a little, so it's ambiguous. But generally speaking it's suggesting we're past the highest energy point of the run. (Unless a whole new section of strong green appears, which happens occasionally - and if it does this'll be ripping.)
Increasing A/S by 900,000,000 shares is significant, especially when the company nearly maxed its prior 3,000,000,000 A/S, and is currently trying to sell two of its subsidiaries (and a bunch of IP?) to a different ticker. Tracking the O/S provides insight into how fast they're issuing new shares.
Yeah, I mean 6 weeks ago.
2,830,435,953 O/S as of 12/31/22 (see Page 1, I'm struggling to find my tally from March.)
2,890,435,953 O/S as of 5/4/23
60 million shares exactly. But I derped and included the 32.5 million they'd already reported in my "roughly 90 mil" figure in that other post. (: