top123, you're wise to maintain the right portfolio balance, and not let this one investment mis-weight the portfolio. I've made this mistake and it usually ends up badly. I have a few stocks in which I'm underwater; and I feel high conviction; but I'm not going to make the mistake of their becoming too high a portion of a portfolio.
I went into the market 3 times today to add, all of them at about the same price, which was more coincidence than planned. It's hard to know if we're going lower or higher, but I'm going with the view that we're just in an arbitrage situation where there are a lot more sellers than ready buyers, and the sellers almost know that they are taking less than they should or want..but they are sick and tired of the company.
The imbalance is created because the sellers are motivated and there are a huge amount of them, and buyers need to have some awareness and conviction...we're just at a moment where there are way more motivated sellers than there are conviction buyers. In 6 months the motivated sellers will be somewhat gone and in time we'll be able to have more informed buyers to be grown....although the anxiety of a horrible secondary will always be around our neck, unless the company licenses Olinvo in the US/overseas.
Anyway, that's how I looked at 2nd and 3rd purchases of the time -- as an arbitrage to take the too-cheap shares today and hold them for 2-3 months while the seller/buyer imbalance adjusts.
Sellers are right to be freaked by impending dilution concern. The company is spending cash fast; management implied they will be pursuing more early trials for new things as well as more trials for Olinvo..the shrunken market size of the Olinvo + the competition + the voracious cash spend...it all combines to make beaten down owners accept the $3.6 instead of hoping for something better...and every one selling the past two days is feeling stupid that they didn't dump their shares when they had the chance for 4.15 and 4.0 just days ago.
The company blew through $7M+ more in the 4th Q than the market expected, and management talks as though they will keep spending like crazy....this, combined with a shrunken revenue stream well off in the future can make remaining shareholders from the "pay $7 and hope for $70 shares" era darn sick of the company.
I'm betting we're at a low and the seller-buyer imbalance will gradually change from here, with fewer remaining desperate sellers and more opportunistic buyers....but this view may be proven dead wrong in the coming days.
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Top123, any insights from your wife's discussions with the company would be very welcome and interesting if you are able to share them. Thanks.
