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It was announced that Avita is seeking $100million AUD at $0.59/share. This would equate to roughly 169million new shares of AVH, or a 9% increase to the company's issued shares, which means the % ownership of all current investors will decrease by roughly 8%.
For example, if you own 1% of the company today, you will own 0.92% of the company after the CR. It's important to remember though that although you own a slightly smaller % of the company, the "new" Avita that you own is also $100million richer in cash than the "old" Avita. This is a significant amount of cash, and will likely be the last CR they need to do (barring any future FDA trials). Looking at it from this perspective, the dilution is mostly "offset" by the benefit of the significant cash infusion that should last the company until it is cash-flow positive.
Looks like it will be $100mil at 0.59/AVH share or ~$8.08/RCEL share. This is on par with what I would've expected in terms of the offering discount, and it is right at the recent support we tested and bounced from at the end of October. In my opinion, having another $100mil in long-term, institutional money come in at this level will only further solidify this support. I would expect this is also the last time Avita needs to raise operating funds via the market. Everything is looking good here.
https://www.afr.com/street-talk/avita-medical-raising-100-million-20191111-p539e7
The timing of this CR is interesting in that the terms could be announced the same day we enter the ASX 200. The SP will likely drop to whatever the offering is priced at, but at the same time we will have ETFs/index funds looking to acquire ~80million AVH shares by close of trading on 11/13, likely making this drop very short-lived. Either way am curious to see the terms of this CR. The amount raised this time around will be relatively small compared to our market cap now relative to the last CR in 2018, but hopefully they negotiated a much better price than the last one!
Looks like trading will be halted until potentially Wednesday as Avita finalizes a "potential capital raise". I knew a raise would eventually be needed but assumed we'd see this early next year, but I suppose management wants to hit the market while the stock is hot.
https://hotcopper.com.au/threads/ann-trading-halt.5065516/
I doubt we'll see much effect on the SP from this weekend's burn conference as it is for medical professionals and not the investment community. If you look at the itinerary online it's all workshops and speaker events from and for medical professionals.
I believe the 15% long-term capital gains tax applies if your taxable income for the year was under ~$430K. For any gains above that level you would have to pay 20% cap gains tax. If your gains do put your income above the $430K level, you could sell your position strategically, spreading out the sales in different years to keep your annual income below the cutoff level.
This does not include any capital gains tax that your state may or may not levy. And if you find out how to pay 0% tax (legally of course) please let me know.
Some more Recell media coverage posted yesterday.
https://www.nbcdfw.com/news/local/Spray-On-Skin-Better-Than-Grafts-for-Some-Burns-564244341.html
AVH up nicely after another attempt by the shorts to take it below $0.60, which failed to follow through with any volume. I believe we will see the ~40million share short position in AVH start to cover soon as real sellers dry up down here.
A new article from Robert Montgomery tonight regarding Avita's Q3 results and progress. He is pleased with the progress and remains invested.
https://rogermontgomery.com/is-there-more-upside-potential-for-avita-medical/
Call me aggressive, but I'm expecting ~$8mil AUD.
Most insider transactions will likely be under AVH as opposed to RCEL since shares and options that Avita gifts insiders as part of its compensation incentive would have to be actual company shares and not the ADR.
Try this link. Shows the last insider transaction on 8/22.
https://finance.yahoo.com/quote/AVH.AX/insider-transactions?p=AVH.AX
While it's possible the company might seek out a business loan instead of doing another capital raise I think it's a near certainty that they will need at least a small amount of cash to keep the company running. Last time I ran the numbers using current expenses I believe cash runs out at some point in Q2 next year, so they will likely need to take some action in Q1. I don't think they will need a ton of cash this time, but they will need some.
Either way, I'm not too concerned by this because even if they choose to issue more stock, dilution should be very minimal given the small amount they'd need to raise relative to their market cap.
Historically, the company has posted the financials on the morning of the 31st prior to market open, which would be Wednesday night in the US.
Hi Jim,
You can still find all this information by viewing the company's primary listing (ticker AVH) on Yahoo Finance or even directly on the ASX exchange website. The Yahoo page below shows recent insider transactions in AVH, which have mostly been small purchases as a result of insiders executing options. I do not see any sells posted as of late.
https://finance.yahoo.com/quote/AVH.AX/insider-transactions?p=AVH.AX
Yes, Recell is currently reimbursed by insurance in the inpatient setting/operating room. I believe Avita's latest corporate presentation indicated that they will be looking to target the much larger outpatient burn market and are currently working to make Recell eligible for reimbursement in the outpatient setting as well.
While I don't disagree, ultimately the preferences of the ~300 US burn surgeons are going to determine the % of cases where Recell is used, and therefore how high revenues will grow. I've reached out to a number of burn centers to hear firsthand how they are using Recell to try to estimate this %.
From the feedback I've gotten, I estimate on average it's being used on ~15% of inpatient burn cases right now but I expect that % to increase as the surgeons become more comfortable and familiar with using it. But this is just an average and therefore not too reliable as the range of responses was quite large. Some surgeons indicated they see no reason not to use it on all their cases whereas other surgeons have indicated they are only using it on large burns (>30% TBSA), which would be about 10% of their inpatients, often citing they can't justify using it on smaller burns because of the cost. As you can see, how frequently Recell is chosen as a treatment truly depends on the surgeon's preference. And whatever this % turns out to be, it makes a very big difference in revenues.
I would love it if Avita gave us some insight into the % of cases in burn centers where Recell is chosen as the treatment (or one of the treatments). This is why it's unfortunate they do not do a quarterly conference call, as this is a question I would ask.
It all depends on whether you think the results will be better than the market expects. I think there's a good chance they will be, however you never know, so perhaps the safest approach would be to buy half now and half after.
Looks like MMs trying to play some games and bring RCEL down into the close despite what appeared to be some decent accumulating today..
Fair value for RCEL based on last night's close in Australia is ~$9.20/share. RCEL is currently trading at $9.18... so nice to see that RCEL is no longer trading at a discount to AVH.
Up another 4.6% in Australia overnight so far on solid volume. Currently at $0.68AUD and closing in on our all-time high of $0.69.
I also like how as of 10/10 there were still ~50million AVH shares held short. If they start to cover in masse things could get explosive real quick...
With 10/31 quickly approaching, I'm curious what everyone thinks we'll see for Q3 revenues?
I'm personally expecting between $8 to $9million AUD (so about $6million USD). I realize this estimate may seem high compared to Q2, but it is based on a decent amount of field research and is not based on wishful thinking at all.
You can track it here.
https://www.shortman.com.au/stock?q=AVH
And I will add it appears the ~50mil AVH share short position is still open... if these shorts start getting covered things could get explosive quickly!
It had that vibe but I don't believe it was a paid advert since surprisingly it didn't mention Recell by name, the stock or even the company.
It's interesting that the bid/ask spread right now is $7.64/7.88. Fair value based on AVH's close last night would put us at $7.48, and the pre-market spread is usually in line with the Australian close or a bit discounted. I wonder if someone is lined up to buy this morning.
Here's some new media coverage of Recell to close out the week. Dr. Kopari from the burn center in Fresno, CA describes how she likes to use Recell on 2nd and 3rd degree burns, as well as for facial burns, citing its great cosmetic outcome, faster healing time, and of course, smaller donor site requirements.
https://www.yourcentralvalley.com/video/medwatch-today-recell-device-helping-burn-patients-heal-faster-and-more-efficiently/3990008/
Dare I say we've reached a bottom? I'm definitely noticing a change in pattern today where the selling seems to have subsided and someone is nibbling for shares again...
Well said... I always like to focus on the company's progress rather than the stock price. As long as Avita continues to show strong revenue growth we will see the stock price follow over the long term.
Really odd trading today... $0.75 spreads, price dropping $0.25 on 1,000 share orders... someone trying to shake the tree or new market makers still adjusting their positioning?
On second thought, we probably won't get an updated investor presentation for tomorrow's conference as it looks like this one is meant for nurses and doctors to collaborate and share experiences and best practices as opposed to attracting investors.
I wonder if we'll get an updated investor presentation on the web tonight for the conference!
Regarding the uplisting today, I was a bit surprised that the bid/ask spread is actually wider than what we were seeing on the OTC.
This is purely opinion (once in a while it's fun to theorize), but I would guess that MS closed most of their ~22mil short position last Friday. If you noticed in Friday's trading AVH was stuck at 0.55 most of the day as if that was an invisible floor where someone was buying up all the supply at that level. Notice that Friday also had very high volume (~17mil) and only ~2mil of that was short volume. And of course AVH rallied hard on Monday. All speculation of course, but a strong possibility IMO.
Here's a nice extract I found from this article back in March 2019. While it doesn't mention recell directly, it does reference it. Dr. Cochran indicates that it is leading to a lot of changes in their practice patterns.
"There’s also innovative research being done to move away from the painful process of harvesting healthy unburned skin to use for treating burned areas and looking at other possibilities like using patient’s own skin cells as a sprayable product.“Burn care is in a really exciting phase right now in just how it’s evolving, and I think a consequence of that has been there has been a lot of changes in our practice patterns,” Cochran said."
https://www.daytondailynews.com/news/local/shriners-move-dayton-comes-burn-treatment-rapidly-advancing/cARaxmFRvf04ozIrNvz0xJ/
How so? The only money they are losing starting the day they borrow the shares is the interest they agreed to pay to the lender. Whether the share price moves up or down after they received the shares doesn't matter (since all they need to do to end the agreement is return those shares to the lender). MS only loses or makes money once they actually sell the borrowed shares, which they can do whenever they want - as soon as they receive them or they can gradually sell the shares over time. In this case, MS borrowed 160mil shares in Sept and by my estimates has sold 20-30mil. of them.
The price at the time they borrowed the shares doesn't really matter much since that's just when they took ownership. The price at which they then sold some of those borrowed shares will tell you how much they have made so far on the short position, however the sells are not disclosed in the filing. But from the size of their short (~22mil shares) and knowing that the same amount of AVH shares were shorted on 9/20 we can safely conclude that they sold the 22mil shares short around 0.61/share.
Another reason why I think MS's AVH short play is a short-term strategy is because as the borrower they also receive the right to vote that comes with the borrowed shares. The investment firms that lent MS the shares will likely want the right to vote for Avita's next annual general meeting, which in the past has been held at the end of November. Therefore, there's a good chance that the lenders will ask for their shares back by November, assuming MS doesn't cover and return them before then.