Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Register for free to join our community of investors and share your ideas. You will also get access to streaming quotes, interactive charts, trades, portfolio, live options flow and more tools.
Important Update... Reverse split is official and listing price range has been specified. They updated the S-1 again. The split is or will be 1:26. Target listing price is $5-$6. They continue to plan to list on the NYSE American. I haven't read beyond that.
These numbers basically mean that if you're averaged in around 20 cents a share, you will be roughly even, or thereabouts, if/when the IPO is executed and trading resumes. Not ideal for an early investor when an IPO happens (one expects a bit of a windfall, and that ain't happenin' immediately). But, frankly, I will just be happy that we're trading again and I at least haven't lost anything on Day 1.
I plan to contact my broker on Monday morning to make them aware of this. Without the new ticker in place, I doubt there is much that they can or will do immediately, but I want this to be on their radar, as it seems that we are moving toward a resolution now.
It would go a very long way toward restoring the faith of investors if they would do what all responsible public companies do, which is to have a conference call (or Zoom session) for shareholders and analysts. That would end all of this needless speculation and calm all the frayed nerves. There's nothing like human dialogue and honesty for defusing fraught situations. And it's not like such a thing is odd or weird. Quite the contrary, it is expected. What's odd and weird is a Company that stopped communicating three or four years ago, and acts like nothing has changed.
@grandslam... The simple answer is they have addressed legacy shares, and have reiterated that they exist. This is clear from personal correspondence with their CFO, and from all their filings. They haven't made any attempt to hide or vanquish legacy equity; they've just done what all of these companies do, which is to dilute it of any real significance to the business. They don't specifically address legacy shareholders in any communication because (a) they are not obligated to address us as some sort of separate entity, and (b) we account for a minority of the shares that now exist. So we have no power or influence, outside of the inevitable lawsuit, if they should drag this out much longer.
If/when they ever relist, your shares in a brokerage account will convert to the new ticker automatically, if it is handled properly and legally -- by which I mean that VB will notify all the brokerages of the change, and provide instructions for how to handle any reverse split. If they do the IPO and your brokerage still lists your shares as VODG, then something is wrong, and you should contact both the brokerage and VB's CFO immediately, both electronically and in writing. In short, there are no shares to "get back". The shares exist, or at least they should. If your brokerage isn't showing the VODG shares (at zero value), then, yes, there is a major problem that must be resolved now, not later.
They tweaked the S-1 again. No time to review in any detail, but it looks like an administrative thing to me. I did notice that they added "CLIA" certification to their lab status (they've had that for a while, but it's new to the S-1). I don't want to overinterpret that, but it could be interesting. Their lab and manufacturing platform are distinguishing factors. If you remember, the FDA shot down a Mesoblast application a few years ago, despite near unanimous recommendation for approval from the advisory board, because of concerns with characterizing the actual product (as well as concerns about vague mechanism of efficacy, which I personally found to be BS). Mesoblast was also farming out its manufacturing, which didn't help (not sure what it's doing these days).
My sense is that VB is emphasizing its unique and proprietary manufacturing platform, which of course depends in large part on those certifications. If and when big pharma should ever lose its grip on the FDA, along with its ability to sabotage approval of cell-based treatments, the demand for a US-based lab with strict manufacturing and quality standards could mushroom almost overnight. This is such a feast or famine play. I knew that when I invested, but I didn't expect almost 20 years of this nonsense.
This more than anything explains what has really been going on for the past year or two. There was a biotech IPO frenzy in 2021 -- which is probably what spawned their initial, less than professional "corporate presentation" that first uttered the golden acronym "IPO". But as has been the case so many times with VB, they were a day late and a dollar short. The entire biotech IPO market dissolved last year, with rising interest rates, just as they were rebranding themselves, disposing of dead weight, and making a legitimate offer. But the times they are a-changin', and the expectation is, or at least was, that the IPO market would rematerialize this year. And it still could. But it's June. "This year" will disappear quickly, as all the other years have done. If key players begin to defect then we will know that this isn't happening. So far, it seems the core team that matters remains in place. We'll see.
They freshened up their web site, updating forward-looking dates that had become backward-looking in their ever-growing sea of temporal inertia. So they do at least still care enough to do that. If there is any additional bright side, it is that they continue to suggest that two clinical trials will start in 2023. Well, it's basically June. So I don't know how you can make that statement without some sense of the required IPO $ being imminent. Backwater OTC penny stocks might say such things, but real biotechs can't get away with it. So perhaps a deal is in the works.
Still haven't read it, and won't. But it is a substantial document, and does explain everything you might need to know about the business, as S-1's do (and their previous version did). So if you want details on how many patients they've treated and where, it's all there. No claimed results, except that they have had no adverse reactions (not surprising that they would stress that, as basic safety of the product needs to be established ASAP, and is really the only value of the offshore studies at this stage).
The IPO is indeed scheduled for this year, as 2023 is indicated in various places. I'd guess sooner rather than later, insofar as their burn rate is now high and they desperately need the money. To that point, I did notice an interesting little ditty buried somewhere in the middle. It sounds like, as of April, they have a bit of a disagreement with European Wellness regarding payment under their services contract. Surprise, surprise. When I read about that deal when it happened last year, it struck me as one of those things where the customer expects the world (basically, access to the FDA -- doesn't everyone...) and the supplier is shrugging and saying "we'll do the best we can, show us the money". I could be dead wrong, but that's what I read in the tea leaves that they have buried in the S-1. And that tells me they need the money even more now, as they were likely counting on the next $600K from EW to pay the bills. Without those $, they need to get serious about the IPO. My interpretation only.
In any case, there are no significant IPO-related numbers other than the expected range of the reverse split, which of course is is extremely important, and new info. Thank you Nathan for doing us that solid. The other number that matters is the share price, which one would hope would be north of $10. But it can't be under $5 or so to get a listing (I'm not up on the latest rules of the NYSE American, but you certainly don't want to list the shares, and then be immediately battling a delisting if the price drops a little). So we'll see about that. Bottom line: It appears that this is happening. Be sure your broker is prepared to convert your shares. Best guess is the SP will drop quite a bit at first, and then do what all biotech IPOs do -- bounce all over the place based on rumors from clinical trials. If that's not for you, I'd sell. OTOH, if the clinical trials go well, the beautiful thing here is the share count will likely be something in the range of 5 million, which is nothing -- meaning there will be ample opportunity for multiple stock splits if things go well. And, personally, I do expect things to go well initially, in terms of basic safety, and enough efficacy to warrant moving to the next phase. There is a lot of anecdotal smoke with AlloRx, and I suspect there could be fire, once they get it into real clinical trials. We'll see.
They refiled the S-1. No time to read it, but it seems like they're finally serious about the IPO, They've committed to a listing on the NYSE American exchange, with a reverse split in the range of 1:20 - 1:30. So that's real info. That is right in the range where most of my spreadsheet-based conjecture from last year was focused, because that is the range where the numbers start to make some sense (if you weigh the interests of current insiders vs. the interests of those buying into the IPO). I didn't see any info on an IPO price, but, again, I don't have time to read it right now. If it's say, $10, and the reverse split is 1:25, and a market actually developed at that price, most legacy investors would see an immediate paper gain of between 60%-100%, by my prior calculations. Depends on your average price. From there you can choose to sell or let it ride.
I'm going to skim the rest sometime this week, and, if it seems serious enough, contact Schwab again. I want there to be no ambiguity that my shares are registered with the Company and will automatically convert on the day of the IPO.
@Dirk... They fully understand the perilous situation. A lawsuit at this stage basically blows it up, and ends the whole thing for everyone. And once it is fully evident that they they truly have no regard for the legacy shareholders, I for one will be happy to see that happen -- particularly after they let Zamora rob the store, and spent a couple million dollars (I think) on a separate product line that their own documents now deem to be worthless.
But I still believe that Musick is a decent human being, and did not set out to $crew everyone. I do not want to destroy the man's work, unless he refuses to cooperate with shareholders. Things have now progressed to where it is put up or shut up time, in terms of a public listing. They have done everything they need to do to re-engage on an exchange. The only excuse (which is running out quickly) is that they would prefer to do this via an IPO, so that they can generate the funding that they desperately need (having assumed a lot of overhead last year without any means to pay for it). But the IPO is now almost seven months old, and is gathering moss quickly. There have been no updates (which I realize is probably necessary to an extent, but c'mon...) There is a point -- and that point for me is a year after the IPO was announced -- where they have to either go through with the IPO or file for an OTC listing without an IPO. There is no rational justification for further denying liquidity to legacy investors otherwise. Every day they do is a tort, with very real damages. Their lawyers have to know this. If they want the shareholders to give up and burn down the house, that's up to them. They either give us liquidity this year or face the consequences. As I said recently, I've had it with these people.
I don't think this is complicated. Musick and Zamora (indirectly) own most of the company. I don't think investors want any part of that. The Board took control of Zamora's shares a few months ago, which I'd guess was a shot at appeasing some "you gotta be kidding" sentiment from the investment community. But they're still being asked to invest in a company where something well north of 60% percent of the shares are owned by two individuals. As I said early on, I don't think that will fly. They will need to find some way of selling a sizeable chunk of the Musick/Zamora shares into the IPO pool. In theory, they don't even need an IPO, since there are so many shares in those two individuals' coffers. Musick and Zamora would get rich instantly (deserved in one case, a travesty in the other), but that's the way these things work.
They need to sell 40 million of those M-Z shares to some investor, do a 10:1 reverse split, value them at something like $6 each, and relist the shares on an exchange -- any legitimate exchange will do. As part of this, Musick and Zamora would be required to lend half of the $24 million in proceeds back to the Company at 0% interest for a couple years, for the operating capital they need to run the clinical trials and pay everyone for a while. Problem solved.
If they want this company to (a) not dissolve and (b) not be sued into oblivion by 3,000 disgruntled shareholders, they need to get this done.yesterday.
10-Q for Q1-FY23 was filed. Blah blah blah. They need money. Blah blah blah.
It mentions their IPO in passing, with no further info. They need money. Blah blah blah. Fitore was a joke. Blah blah blah. Zamora took us to the cleaners and Infinivive is a joke. Blah Blah blah.
Etc.
At this point. my best guess is they find a way to go out of business, blow up the equity structure, and reboot what they've been doing for 20 years -- i.e., fiddle around with just enough OPM so that Jim Musick can spend his days doing his research. Good for Jim. He's an honorable and very smart man. But this just isn't a serious business -- it's a mechanism for a scientist, a dermatologist, a lab person and some hangers-on to blow through capital to feed their own particular curiosities and financial interests.
I will happily admit I'm wrong when they provide some evidence to the contrary. Until then, I'm done.
If nothing else -- and if they can't for some reason discuss what happened to the IPO -- they need to update shareholders on the Pitt-Hopkins clinical trial, in a clear and concise way. Has it even started? Nobody knows. There were milestones for Q1 -- and we're now half way through Q2.
We are shareholders. We have rights. Do they really think we're going to tolerate yet another year of dead silence? Dr. Musick, I'm a reasonable guy. But this can't go on much longer. If the IPO is dead, use your influence to follow up on your original promise to relist on an OTC exchange, without a reverse split. Either that or make an offer to buy back the previously public shares.
You can't sequester our capital forever. There are damages involved, and they are growing by the day. It's March 2023. The five year plan from 2018 is over. The Company is public again, in every respect except the one that matters to shareholders. Tell us what is going on, and when we will be liquid again, or this just isn't going to end well for anyone.
March 12 will be 6 months since they announced the IPO. It's way past time for the CEO to update their legacy shareholders on status & timing. Furman has been as invisible as Zamora was. They are effectively a public company again, in every respect except public trading. If the IPO isn't working out, they need to get a listing on an OTC market while they figure out how to raise required funds.
Enough is enough. This situation isn't sustainable for much longer. You can't just wish away all the past equity by pretending it doesn't exist. If the IPO is real, give us an update. If it's wishful thinking, it's time for Plan B.
@grandslam.. Yeah, all that stuff, and a bunch of other stuff, has been in their various filings since the IPO announcement. They're just copying and pasting it. I guess the bright side is they're not hiding anything nowadays, relative to core issues and financials. The story is there for all to see.
In the end, they will either get the funding needed for the clinical trials or they won't. They bet the farm on going legitimate with domestic approvals, so these clinical trials are the ballgame now. But the IPO is probably a hard sell with control of the company in the hands of so few people. Fortunately, Zamora isn't one of them anymore (I suspect that was a sticking point early on, necessitating his recent ejection from leadership). But I'd bet it's still a problem.
One of the spreadsheet models I played with when I started looking at IPO possibilities back in the fall was the possibility of key stakeholders being required to sell into the IPO, to reduce their control going forward. I have no idea if that kind of thing is done, but it would solve a number of problems. Unfortunately, they are not saying anything about the IPO publicly (I assume they can't even if they wanted to). It's going on 5 months, and their burn rate is higher than it used to be. Something has to give soon, or they're going to run out of money. And it's hard to believe they would be that staggeringly near-sighted, after decades of promising research.
The 10-K is out, as expected. TBH, I don't feel like wasting my time reading it. it appears to be 99% boilerplate verbiage from prior releases. I haven't bothered to look at the financials because, really, who cares until the stock is trading again.There are a couple general references to the IPO effort, but no update or explanation or projections. Whoopee.
The only interesting tidbit I saw -- which I don't want to take out of context but will mention because it's the only interesting detail I came across in a two-minute skim -- is that, for at least one purpose, they are valuing themselves at $200 million. Again, this is out of context and doesn't mean anything. But if they should ever actually do the IPO, and the market values them in that ballpark, we will all be in pretty good shape. I'm not holding my breath. The more likely outcome is we'll get a quarterly in a few months that's equally vague. My sense is that the selling of the IPO to the institutional class is not going well. But who knows.
They filed another amendment to their Form 10 today, to respond to more comments from the SEC. My patience with this is gone, and I am not inclined to dig through the latest filing to see what changed. Of course, it is possible that the whole IPO thing is waiting on the SEC to stop nitpicking the Form 10. But who knows.
You never know, perhaps we get lucky, and this is all final cleanup as Q1 comes to a close, before returning to trading in February as predicted. I wouldn't bet on it. But, conversely, I don't know how they can possibly delay these things much further. As I've written before, business plans need to be executed within the span of human lifetimes. This company treats decades like most companies treat months. Something has to give soon.
They filed an 8K with the SEC today. Apparently they sold some warrants to raise some cash. I'm not going to waste my time trying to parse the details -- there's a point where it's just not worth the trouble. In the end it's just more dilution.
I have no idea how this affects their IPO. I suppose one interpretation is they needed a bridge loan to get the clinical trials moving, while the IPO waits. Or perhaps the IPO is off the table. The filing does say that they expect to file their annual report by the end of the month, so presumably we will get some information in the next week or two. So let's see what they have to say. That said, my patience is just about gone, so this better be good.
@Dirk... When the IPO is completed, new message boards under the new VTRO ticker will pop up the same day in various places. I will likely move my comments back to Yahoo at that point. Or maybe just start a new discussion board here.
When they announced the IPO in August, I speculated that it would take until February to return to trading. I'm sticking to that guess. If this drags into spring, it would signal to me that they are having difficulty generating interest in the shares, and/or the dilution of legacy shares needed to generate interest is too steep (remember, the insiders are holding more or less the same legacy shares that we bought). They need this to close in order to fund their clinical trials, which are the key to everything right now as the company tries to transition from murky offshore treatment facilitator to legit biotech.
@grandslam... Best I can do is summarize my take on the situation, the details of which are buried in various posts from the past four months. In short: There will be a new ticker. They already stated it. It's VTRO. The ticker and the underlying security are separate things. If you bough the VODG stock, then you are a shareholder in the company. They can't change that. It will be your broker's responsibility to transfer what you own to the VTRO ticker when it activates, and everyone will need to follow up on that carefully, as I have zero faith in the brokers or the recordkeeping at VB, based on my interactions with both. This is a unique situation, and we will need to protect our rights actively when the transition occurs.
As for the IPO, all IPOs occur in the context of a company that already has private shares floating around. The new IPO shares add to the share count, in return for generating needed capital. The main weird difference in this case is that some of the shares were already publicly traded in the past, before they were delisted. That isn't common, but it doesn't change anything fundamentally. Shares are shares. The challenge in this case is the number of existing shares relative to metrics that major exchanges require in terms of valuation and share price, particularly with the giveaways they did during the unfortunate Zamora era. See prior posts for details. That added up to the fact that there is no way they can do an IPO without doing a reverse stock split on the legacy shares, the details of which have not been announced. At the same time, the $ value of the IPO ($17 million) is not sufficient to create the valuation necessary for a listing. This sends the clear message that the legacy shares remain a significant part of the valuation. How much... we shall see. But it seems to me that the legacy shares will remain roughly two thirds of the value of the company. If true, we are taking a 30% dilution in return for a return to trading on a major exchange with real volume. That's a good deal, if it all works out that way.
If it does work out that way, the key here is to assert your status and rights as a shareholder literally the day that the IPO occurs. You can't allow your VODG shares to be lost in the incompetence or administrative shuffle of your broker. They will receive instructions on the split and ticker change from VB, and they must apply those changes immediately to your account.
FYI... They refiled the Form 10 again last week to address a few issues noted by the SEC. The changes don't seem to be substantive, although I don't have the time to examine every detail. The introduction does officially confirm what I had discussed in November -- i.e., that the Form 10 from September went into effect automatically in November.
I imagine that most or all of the loose ends have been taken care of, and it is time for them to announce the details of the IPO in early CY23. This would be consistent with my initial guess that we were probably looking at February to resume trading. But we will know soon enough. I cannot imagine that they have re-subjugated themselves to SEC auditing and filing requirements only to fail to take the final step of entering the public trading markets.
Hey VB inner circle, if you're reading this...
It's time for an update. We're three months into the IPO process, and we have no idea what kind of reverse split we're looking at. That's the ballgame right now, and your extraordinarily patient legacy investors -- who to this point have gone out of their way to keep the lawyers off your back -- need to know what you have in mind. Some of the drips of news seem to suggest that everything is moving toward a new and better future. But does that future protect the investments of people whose money has been tied up for 10-20 years? Those people need to know.
The original IPO documentation seems to suggest that you expected at least the possibility of funding before the end of CY22, since the projected start of one or more clinical trials stated end of the year as a possibility (and would presumably require the IPO funding to be in place). Is that still on the table? If not, what's our time frame? And, again, at some point you need to tell the shareholders what the split ratio is going to be. We've been patient -- and, to VB's credit, it is apparently making significant progress toward shedding the dead weight from the past few years. But in the end, this means nothing to us until we have some assurance of what we actually own. We have the right to know. An update would go a long way toward keeping that unsettled feeling from metastasizing.
Thank you.
More on the Zamora move... I just wrote a lengthy post explaining what I think is going on, and the site lost it. Sigh. So I will summarize:
I read the 8K. My take is they wanted to cut ties with Zamora for two reasons: (1) They don't like him, and he contributes nothing, and (2) They want to get out of the offshore businesses, and are planning on turning those operations over to Zamora. Zamora effectively becomes a wholesale customer, and VB agrees to supply him with product for 5 years. What he does with it is his business. The only stipulation is that any offshore businesses he starts or associates with are legal.
Sadly, Zamora retains his stock (now there's a lawsuit for some enterprising attorney to pursue...). BUT, all of the associated voting rights are turned over to the CEO and Chairman to exercise as they see fit. So Jack has no power and no direct connection to the company other than as a wholesale customer.
It's fairly clear that the company wants to be viewed strictly as a domestic biotech startup, working with the FDA rather than around it. This is necessary to be viewed favorably by institutional investors and others interested in biotech IPOs. My sense is that this arrangement with Zamora kills two birds with one stone -- i.e., it gets him out of their way, removes him from the picture for purposes of selling the IPO, and it cuts their direct public ties to offshore operations without defaulting on some well-established relationships, which can still provide some indirect revenue.
Finally, I would just add that the real value from those offshore relationships probably isn't the revenue. It's the safety data, of which there is quite a bit. FDA apps require documentation of all known human studies. And VB has a lot of that already. And I suspect that those data are making the Phase I/II FDA studies possible. That is, they have a lot of information to show that they won't be killing anyone with experimental treatments. I think they hired Mosessian last year to make the case to the FDA that these offshore trials were legit. And she apparently succeeded. So with that mission accomplished, I think they would very much like to move away from direct association with offshore entities, focusing their efforts on the domestic trials. The offshore stuff is now Zamora's baby. VB can simply quietly supply product to him, and book the revenue.
So that's my take. Could be off base. As always, it's educated speculation.
The Zamora Era Is Over. They just filed an 8K with the SEC. Jack is gone, no longer a director. I have no idea if the relationship with Infinivive remains in place. I have to assume so, since they own it. But I wouldn't be looking at that as a profit center going forward. Sounds like their opinion of him is coming in line with mine. Except they would be in a position to know.
I just get the feeling that Zamora conned and manipulated Musick and/or Evans at a time when they were looking for new markets and a commercialization savior. And now that grownups are in the building, the fleecing has been brought into the light of day. At least that's my take from afar.
Positive move. Now we need an update on the IPO. We're almost three months into the announcement. Some sort of simple update is in order.
Correction to prior post, as I wrote quickly and sloppily. The Form 10-12 does not actually make a company public. All it does is make them subject to reporting requirements. There is no new ticker (yet). But the Form 3's do make more sense in this context. Presumably, the Form 10-12 indeed is now in effect (it's been 60 days), and they have to start filing required reports.
So we're still not out of the woods. A cynical take is they needed to do all of this because they finally admitted their actual number of shareholders, which makes them legally obligated. While that's true, it is not the whole story. Their IPO dreams are real, and I still believe that will happen fairly soon. Until then, we at least own shares in a company that must once again report regularly to the SEC.
They filed a bunch of Form 3's today. Form 3 is required to register securities held by insiders. Not sure why now, except that my prior conjecture that the Form 10 filed in September would go into effect on Friday (11/11/22) might be correct -- in which case the insiders would then be obligated to register their now-public shares. If all of that is true, then, congratulations, your shares are real again.
Of course, I don't know if any of that is true. I will probably contact Schwab this week to see if they have heard anything.
The original Form 10 automatically goes into effect in 60 days, which would be around November 11. I'm not sure if/how the amended Form 10 might affect that. If it does not, than all 115+ million legacy shares should be registered public shares at the end of next week. The IPO shares are a separate thing, under Form S-1. This sequence is not common, but presumably is made necessary by the revocation of the original securities.
So if I am understanding this correctly, all legacy shares should be re-registered with the SEC very soon under the Form 10-12 & Form 10-12/A. The S-1 will then create some unknown lot of new shares, which will be created in conjunction with a reverse stock split of the legacy shares so that listing/valuation requirements of an exchange can be met, while allowing for the dilution that will be necessary to attract interest in the IPO shares. I remain hopeful that this will be trading again sometime in Q1 CY23, with all legacy investors intact.
They refiled the Form 10 as well. It appears that financials through July are included. We still don't know the terms of substance of the IPO. I am not an expert in these matters, but it does seem odd that you can file forms of this magnitude and depth and not state how many shares you are registering. But that seems to be the way it works, unless I am missing something.
In any case, I am very confident that this is happening. There is no way that they invested what they have invested to create and file these forms, and will remain private. I'm still not convinced that they will be on a major exchange as advertised, but I think the shares will be public again fairly soon in some shape or form. How the reverse split affects legacy shareholders remains to be seen. Stay tuned.
I found the filing. See link below. It does not do what I expected in the earlier post -- i.e., still none of the numbers that matter to us.
Based on a quick scan, it appears to me that the primary change is that they intend to list on the "NYSE American" exchange (formerly the AMEX). The NASDAQ appears to be off the table. I can only assume that the listing requirements are more favorable. Based on some very quick research, it does seem like there are more ways to qualify. Whatever the case, it seems evident that they have received some feedback in this area this fall, and have adjusted accordingly. It occurs to me that this filing might also include updated financials; I will have to look at that tomorrow, not that it really matters at this point.
Form S-1/A 11-3-2022
It appears that they filed a Form S-1/A (an amended S1) today (11/3/22). I am experiencing some difficulty accessing it this evening, but will try again tomorrow. I'm guessing that this will fill in some of the important blanks from the initial filing. If it does, then it will more or less define the prospects for legacy investors. We shall see.
@grandslam... Yes, sadly, there are way more paths to destruction in the biopharma world than there are to success. TBH, I never expected to be in this situation with this stock. When I started with it many years ago, I viewed it as a gamble on non-controversial stem cell therapies, which I expected to become a hot commodity after the controversies with embryonic stem cells in the mid to late oughts. Unfortunately, that never happened. Instead, the industry was saturated with charlatans who were damaging people and ripping people off. VB always struck me as different (which it is), but it had to deal with serious headwinds rather than the rapidly rising tide that I expected so long ago. It's really amazing, and a testament to Musick's commitment, that it survived through all that. If they can pull off the IPO as stated, it will be a truly remarkable survival story. But I expected a run on the stock a decade ago, which never happened.
As for how they have treated shareholders over the past few years, I think that can be summed up in two words: Jack Zamora. What a joke, IMHO. Except it isn't funny, given what he did to the equity structure, and failed to do as CEO. I could be totally wrong about the guy, but all I can do is react to the info they release. And what I see is an empty suit. As far as I can tell, he's a cosmetologist with a medical degree, not a corporate executive. If I'm wrong, I'd love to see the evidence.
But it's water under the bridge. I did not expect that they would pull off an IPO, particularly given the awful corporate presentation document from last year. I expected (and wrote about) the kind of IPO that I thought might be realistic, which is what they are actually doing now.. And it seems they finally hired the right guy to make it happen. And we'll see if he can complete the job he was hired to do. It would be nice if they would give us a brief update. I understand the need to not violate any SEC rules, but a simple "everything is on track" kind of release would be nice to see.
Partner news... (link below). This is a bit obscure, but it is a good sign. It's a press release from a vendor about a product that VB will be using in the Pitt Hopkins trial. It indicates a few things to me, namely (1) they are preparing to move ahead with the trial soon, and are assuming that the money from the IPO will be in place to fund it, (2) stuff like this is what makes clinical trials expensive to conduct, and (3) they are making every attempt to eliminate all chances of adverse reactions.
Regarding (3), I suspect they have chosen an extremely obscure disease like Pitt Hopkins for this study because it was easier to get approval for an orphan disease (one with no known treatments), not because they necessarily expect positive results. And this one is necessarily limited in scope, since there aren't that many people who have the disease. That and this press release suggest to me that what they're really after in this particular trial is to establish safety, not (necessarily) efficacy. If they can establish safety in a domestic, FDA-sanctioned trial, it's a huge step forward because they won't need to go through such hoops in other trials. So they are spending money to eliminate as many variables as they can. Just one person's uninformed take.
Partner Press Release
@grandslam... By now, it is clear that the delisting was part of a larger strategy to reallocate extremely limited resources from accountants to manufacturing and commercialization. I suspect that Dr. Musick was hoping that the finances would improve in time to catch up on the reporting before the SEC caught up to what they were doing (or not doing). COVID finally put an end to any possibility of that (plus, there’s a point where catching up on the reporting just isn’t worth it anymore).
At that point I think the Board decided to view the delisting as an asset rather than a black mark – an opportunity to regroup and eventually do an IPO for required funding in lieu of the series of small-time private placements that they had been pursuing to limp along. Unfortunately, they also used that time as an opportunity for certain key players to rob the equity store (e.g., Zamora). Not a lot we can do about that now. But it doesn’t kill us.
VB is a strange and unique case. Things rarely work this way. But here we are. The encouraging thing about the IPO, as stated, is it is numerically impossible for them to destroy legacy shareholders – the small size combined with the rules of the NASDAQ do not permit it. That doesn’t mean that they can’t change the filing. In fact, I suspect they will, after they are done testing the waters. But they would run into valuation problems if they take it too far.
I am reasonably confident that legacy shareholders will emerge with something of value. It might not be the home run scenario that I was hoping for, but I’d be quite happy with a solid ground rule double at this point. And that will all come down to the clinical trials. IPO + encouraging Phase 1/2 results = surge in share price. The players are at least now on the field for that to happen.
Link to Pitt Hopkins clinical trial
The listing is not new, but this is the first time I have stumbled across it.
@grandslam... My over-under for a return to trading is 2/1/23.
This is all educated conjecture, of course. I wish I still had more of the occasional line of communication with them, as I did off and on through the years. But I don't anymore. That line of communication, particularly with Dr. Musick, gave me the confidence to slowly focus on VB as my exclusive super high risk investment. Years ago I would play with other penny stocks here and there for the fun of it. Most of them die quickly, of course. But VB always had the vibe of a guy who is sincere about the science. And that turned out to be true.
I bring that up to (a) stress that I have no inside knowledge of their plans, and (b) point out that I think this IPO thing is being driven by near-term needs of the science. Dr. Musick is a real scientist, and real scientists like to see their life's work amount to something. I think he believes very strongly in AlloRx, and he wants very badly to see his work bear fruit in domestic clinical trials. And he's not young anymore. And it is pretty clear that their current, FDA-approved clinical trials are being held up by lack of funding. And I think Dr. Musick wants that problem fixed yesterday.
That informal prospectus that they released a year or so ago reflected that desire. Unfortunately, it was JV-level communications (I actually sent them a detailed assessment of many of the problems). To file a real IPO, they desperately needed experienced people who could fix the messaging and organize the effort. So they went out and hired a CEO with the skills to make that happen. And he certainly didn't waste any time.
So what does all that mean? It means that I think VB wants this IPO to close ASAP. They need capital pretty badly, and the clock is ticking. I would be very surprised if the road show with ThinkEquity isn't already in high gear. They are gauging interest & collecting reactions. I suspect that this will go on for a good chunk of the fall, and then they will assess the situation. Per prior posts, I think they will probably adjust the offering for a couple reasons, and try to close it in December or January.
As for our shares, although I was very disappointed and troubled by Schwab's initial response to my inquiry, subsequent exchanges were more reassuring. In the end, they can only act when they receive direction from the company. And I am confident they will act when that happens. As I have been saying for a couple years, the shares exist. Neither VB nor the brokers can ignore them. As long as VB doesn't go bankrupt, those shares should be tradable again sometime fairly soon. The real question is whether anyone will want to buy them -- or if, alternatively, they end up back on the pink sheets as a penny stock, except with a fraction of the shares due to the reverse split. We will know soon enough. It took 35+ years, but the end of the beginning is finally nigh for VB.
Crystal ball time again… Earlier this year I took a stab at predicting the direction of things, and it turned out that I was mostly correct (e.g., small IPO, sooner rather than later, reverse stock split, etc.). So let’s give this another go. Of course, the odds of me going 2 for 2 are not good. But whatever. It's all speculation.
I put the basic IPO parameters into a spreadsheet, and… I have to be honest, I don’t see this thing going through as-is. I expect significant changes. So why is that?
There are some basic constraints here that are driven by the stated goal of a NASDAQ listing. That will require something in the range of a $50 million valuation and a $4 share price, bare minimum (those are rough numbers, as I think there is some wiggle room depending on circumstances, but it doesn’t matter for this discussion). The $4 share price combined with the small IPO ($17+ million) means that they are limited to creating @4 million new shares at most – probably much less because nobody is doing an IPO on the NASDAQ for $4/share.
The challenge is, if you devalue the legacy shares too much, you end up with both a very low share count and an insufficient valuation for the NASDAQ. OTOH, if you don’t devalue them enough, you end up with a valuation that is way too high for new investors to take seriously, as well as IPO shares that don’t represent enough of the company’s valuation. Of course this would not have been as much of a challenge if they hadn’t turned the company over to Zamora, but that’s water under the bridge. The other issue is that Musick and Zamora effectively control the company, and not by a small margin. I don’t think new investors are going to be super comfortable with that situation, particularly Zamora's current equity position.
So I see a few possibilities here.
The first possibility is that they work with the S-1 as stated. They find a sweet spot with the numbers and find a few investors who find it compelling. For example, if they do a $9 IPO and a 15:1 split, that will give the IPO shares 20% of the Company, with a valuation of about $86 million and a total share count just south of 10 million. Those numbers seem like they might be doable, depending on how good a story the insiders tell about the clinical trials.
The second possibility is that the feedback to the road show is “You gotta be kidding – the current insider shares have to be part of the deal.” Meaning that Zamora and/or Musick would need to be willing to sell a lot of their shares into the IPO. So in the above example you’d probably have to increase the split to something like 20:1 and decrease the IPO price to around $7, which would still be a modest win for most legacy investors out of the gate. The new investors would then own about 41% of the Company. The valuation would be on the low side though, which might or might not fly with the NASDAQ. Musick and Zamora would each be instant multi-millionaires – which I don’t begrudge Musick at all, but geez, Zamora? Really? Unfortunately, it is what it is.
The third possibility is they low-balled the initial IPO value based on something like Possibility #1 above. When faced with demands like Possibility #2, they choose to increase the size of the IPO to something like $30,000,000, keep the IPO share price & split at $9 & 15:1, but sell the big insider shares into the IPO as described. That would improve the valuation and value to current shareholders, while still turning over 42% of the company to the IPO shares. Basically, VB’s counter-offer – “Yes, you can have 40+% of the Company and relax the grip of our insiders, but it’s going to cost you.” I'm guessing large investors would rather invest $30 million and have some power than $17 million and be fully at the mercy of two insiders.
Bottom line: I suspect the second or third possibilities is the most likely. I don’t see this IPO being attractive to institutional investors while the company is fully controlled by two insiders, one of whom has his own empire and separate agenda, and did very little as CEO. The market for these things isn’t great right now, but I’ll be an optimist and go with Door #3 – that is, they alter the IPO to both increase its value and include most or all of the shares currently held by Musick & Zamora.
This is 100% pure conjecture, and most likely 100% wrong. As always, you get what you pay for.
A few additional IPO thoughts…
One possibility that seems off the table would be for Musick and Zamora to cash out as part of this deal. They jointly own almost 40% of the current stock between them, which expands to around 70% if you toss in options and warrants (this is based on data in the prospectus, not my own guesswork). If they sold, it would change the overall calculus of the IPO considerably. But it would have to be stated in the prospectus, and I don’t see it. This is an unsettling situation AFAIC. First, I don’t know how Zamora got away with what he did in general. Unless I’m missing something big, he robbed the store. There has to be a story in there. But that aside, that kind of inside control of the company has to be an issue when selling the IPO. Plus, both guys are on the Board. The Board only has one independent member – a situation that, again, might be troubling to IPO investors.
The company managing the IPO, ThinkEquity, is a bottom tier investment bank. By that, I mean that, on average, their IPOs have lost over 60% of their initial value this year. I’m sure that number is skewed by a lousy market. But it is also not very good in a relative sense. We are not dealing with an elite player here, although I’m sure they know how to do an IPO. If they get it back to trading without destroying legacy investors, that will be good enough.
Personnel loose ends… Evans is now a well-paid consultant to the company. Tiana States appears to be the same Tiana who has been making important things happen in the lab for the past decade. I guess she got married along the way.
Generally speaking, the insiders have treated themselves exceptionally well over the past two years. If you’re going to be critical of VB, I think this is the area where they deserve it most. The $200,000+ salaries and stock options were flowing like cheap wine for a while there. It smells, to be honest.
None of this will matter if VB’s clinical trials produce positive results. That is game, set and match at this point. If they move to Phase II/III on one of them, the share price will soar. But it’s a huge if.
All that said, there is an excellent chance that the stock will be on the market again soon, and we will all have some liquidity. Based on all the factors stated, I expect the stock price to take a substantial dip post-IPO. I seriously doubt that my ideal scenario in the near term will happen – i.e., enough of a price pop that I can get my money out and still have substantial house money left in the game. Short of that, I am planning to let it ride. I’ve been in this for over 15 years, so there is no point in getting cold feet at this stage. Just understand that the most likely outcome at this point, based on how most stories like this go, is they burn through the IPO dollars without FDA traction and then need to dilute further. $17 million dollars doesn’t go very far, particularly with how they are now paying themselves.
Bottom line: This is quickly shaping up as a short-term gamble on the efficacy of the product itself. If your appetite for further risk is limited, or you need to recover the $ that you invested, you would be well advised to take any exit ramp that materializes.
Simple Calculation... If you want to know how the IPO will affect you, here's the formula:
GL = (PIPO / SPLIT) - CPS
where:
GL is the gain or loss per current share.
PIPO is the projected price per share of the IPO.
SPLIT is the reverse split factor. E.g., it would be "20" for 20:1.
CPS is your average cost per share for what you now own.
Example 1: If the IPO is priced at $15 and they do a 10:1 split, and your average acquisition cost was 15 cents (.15), then you will see a gain (GL) of 1.35 cents per current share. [Market Valuation = $189 million]
Example 2: If the IPO is priced at $10 and they do a 30:1 split, and your average acquisition cost was 28 cents (.28), then you will see a gain (GL) of 5 cents per current share. [Market Valuation = $56 million]
Example 3: If the IPO is priced at $6 and they do a 40:1 split, and your average acquisition cost was 35 cents (.35), then you will see a loss of 20 cents per current share. [Market Valuation = $34.5 million] NOTE: This isn't realistic because the valuation does not meet NASDAQ thresholds.
As you can tell, the outcomes vary considerably based on your situation and the IPO variables. There are different ways to construct this -- for example, you could replace PIPO with the projected percentage ownership of the IPO shares. But I thought this was the easiest and most useful way to look at it.
In theory, the investment bank will try to arrive at a fair market valuation, and they will adjust the other variables to accommodate. The ratio of PIPO / SPLIT is what matters, but they will want to adjust PIPO to make the entry price attractive, given the risk. That will then drive SPLIT. I suspect this has already been determined, but they aren't releasing that information yet.
Some numbers that fall out of my conjecture in prior post... (1:20 split on legacy shares, roughly 25% dilution from IPO shares). For starters (again, this is pure conjecture):
- Share count roughly 7.5 million
- Valuation roughly $75,000,000 at time of IPO
Those seem reasonable to me. The valuation is low for a biotech with a product, but this is very risky business. The share count would increase to 10 million or so later, as options and warrants are exercised. But by then it won't matter, if the clinical trials go well. It's still an extremely low share count, leaving them lots of room for later dilution as needed.
Example: Let's say you own 10,000 shares and averaged in around 20 cents a share = $2,000 investment. The reverse split that I proposed would leave you with 500 shares at the IPO price of $10 = $5,000. That's a healthy 150% ROI. Not nearly what I got in this for, but not bad. And this is a new era.
As I said, this scenario would make everyone whole, with a decent premium, assuming demand for the shares develops. For those got into this for highly leveraged returns, the good news is the company is finally positioned to achieve that. It can now sink or swim as a legitimate biotech. If the first clinical trials go well, and the stem cell industry makes progress with the FDA, that $10/share could easily become $100 very quickly -- a $750,000,000 market cap is quite reasonable for a company whose product makes it to Phase II/III. So the potential for substantial return is still there for those who like biotech risk.
These numbers are simply my best guess at a situation that makes sense for all parties, and fits the requirements of an IPO and a NASDAQ listing. I could be completely wrong. It's possible that they devalue legacy shares into oblivion and compensate officers and insiders in other ways. But that has never been their approach, and I don't see it happening now.
@grandslam... I didn't see it specifically in those terms, but it is implied by various statements, public and private. For example, the IPO prospectus lists the outstanding shares, which includes all the shares that used to be public... "the number of shares of our common stock to be outstanding after this offering is based on 115,160,180 shares of common stock outstanding as of September 8, 2022..." It goes on to say that this does not account for shares that can be created in the future from known options and warrants, which is OK (although the problem there is the current document does not attach numbers to two of those categories, but I'll leave that issue for another post). It then states that these shares will be subject to a reverse stock split. Basically, they have to honor the shares -- the CFO admitted that to me in correspondence earlier this year.
The real question is how much will those shares be diluted. The ratio of the reverse stock split, in tandem with the PPS of the IPO shares will determine that (since we know that the value of the IPO shares in $17.25 million). And we know neither at this point. But they cannot simply ignore the shares. The document also refers to an "amended and restated certificate of incorporation", which is the vehicle they will use for the reverse split.
I don't believe the company is out to screw everyone. That has never been Musick's MO. As he told me once, "This is my life's work." In that spirit, remember that, in 2018, he converted all of the substantial debt that the company owed him into stock. That's his skin in the game now. That stock will also be subject to the reverse split. So there is built-in pressure to keep this reasonable. And I think they will.
A lot of IPOs are priced around $10/share. If this one is, then that is 1.7 million new shares. If they did a 1:20 reverse split on the old shares, that would mean the new shares would dilute everyone by roughly 25% in this scenario. That would be a reasonable price to pay for the cash they need. I have no idea if that is realistic in the IPO world, but it would effectively make all legacy investors whole, plus a modest premium for most. That's how an IPO like this should work. Whether it actually will work that way ...who knows. But it's something that I discussed earlier this year, so it is coming as no surprise.
UPDATE: Reverse Stock Split.
Schwab got back to me and basically said that the conversion of the shares will be pending the terms of the IPO. So I dove deeper into the IPO document, and, lo and behold, it does mention that a reverse stock split will go into effect when the IPO goes into effect. Which is what I predicted originally, since there is no way that the market was going to value this company at half a billion dollars right now.
Dilution is a fact of life. The split will affect everyone with common stock. So if it's 1:10, your share count will be reduced accordingly. I'm guessing they will adjust the numbers to split the valuation of the company roughly in half between legacy and IPO shares. Probably something in the range of 1:20. That's a total guess and could be way off. Unfortunately, the prospectus does not specify the ratio. I imagine it is a subject of significant discussion. I contacted the company, but have not heard back yet. I suspect I won't.
I would still contact your broker.