Anavex Life Sciences Corp (AVXL)

[apostrophe]

re: "They just registered those shares last week! LP could not by more then 50 k shares a day, at the discretion of AVXL. Even if they buy every day it would take 135 days to purchase 6.7 million shares..."

In spite of that we've seen some dire predictions about dilution (as well as disparaging remarks about book value.)

Regarding an equity raise and "dilution"

Well, if a company has profits, and if one assumes that the price is based on earnings per share, a price to earnings ratio and that that is the sole criteria, then earnings per share would be reduced proportionately and the share price would be expected to follow.

You can't really use PE (price to earnings ratio) ratio on a developmental company because they have no earnings yet. It's a different ball game. To get a positive number, it must be that book value is figuring into "the market's" calculated share price.

Assuming no goodwill or intellectual property value, we don't have any debt, so don't have to subtract that, just using free and clear cash on hand, using book value:

say, we still have $8.5 million cash

divide by 35,000,000 outstanding shares = about $0.24 book value (per share)

current share price of $3.00 / 0.24 = 12.5 price to book (ratio)

BTW, lots of companies have higher price/book than 12.5, like Rite-Aid(13.39) and Netflix(17.28).

Now we add LPC's 6,754,609 shares bought @ $3.00

Cash on hand is now: ($3.00 X 6,754,609) + $8,500,000 = $28,763,827

Book value per share is now $28,763,827 / 35,000,000 os = $0.82 (per share)

Using the exact same price to book ratio = 12.5 :

12.5 X $.82 = $10.25 (New Anavex share price)

Isn't math fun? :)