Impact of new AVXL share sales.
Ok, Anavex is announcing that it intends to raise $150,000,000 by selling new, created AVXL shares. This, of course, will reduce the relative value of each existing, earlier Anavex share. More shares against which any sort of value must be divided, whether in eventual dividends, or any other calculation.
Pretty distressing, yes? I’ve got a few thousand AVXLs in my brokerage account. After Anavex collects it’s targeted $150 million dollars, what might that mean for the value of my shares. Let’s see. (Spreadsheets wonderfully allow these calculations.)
The first number to enter, at the top left cell, is the number of existing AVXL shares, in trade. My Schwab account says there are 75,710,000 of them right now. To get it’s $150 million new dollars, Anavex will increase the number of shares in trade. How many will that be?
In a new column I entered potential share prices for the new sales. In the first, top cell I entered $20. Next cell, $25, etc. These were the new share sales prices I punched in:
$20
$25
$30
$40
$50
$75
$100
$125
$150
$175
$200
Then, how many new shares, at each of these prices, would be sold (to yield $150 million)? These:
7,500,000
6,000,000
5,000,000
3,750,000
3,000,000
2,000,000
1,500,000
1,200,000
1,000,000
857,143
750,000
Lastly, what would be the percentage increase of total shares, at each of these sales prices:
9.91%
7.92%
6.60%
4.95%
3.96%
2.64%
1.98%
1.58%
1.32%
1.13%
0.99%
In summary, at the worst case (at a new shares sales price of around $20), there will be an approximate 10% increase in the number of Anavex shares in trade. If they can be sold at $200, the increase will be about 1% of new shares.
For my AVXL position, of little or no impact. I’ve only a few thousand shares. For Anavex CEO Dr. Missling? How many hundreds of thousands of shares does he own? Is he jeopardizing the value of his holdings by this proposed sale of $150 million worth of additional shares? I think he’s got it covered, that overall, both the company and its shareholders will eventually benefit.
