Humanigen Inc (fka HGENQ)

[10nisman]

But if HGEN shot up tomorrow for whatever reason, I didn’t lose anything because they sold shares through the ATM the last month. Dilution is a high class problem, and we’re a low class stock - for the moment.

What?!! Although, HGEN is a low class stock.

You do realize Companies are based on valuation --- so, the more shares outstanding the lower the price per share for a given valuation. You're expecting HGEN to shoot back to prior prices, when you're not taking into consideration dilution which means, a lower share price for the same valuation.

Let's try one more example and we'll use round numbers. Let's say we think HGEN is worth $1 billion so we'll use that. Let's say there's 50 million shares outstanding, a $1 billion valuation means a $20 share price. Now let's say Management sells a bunch of shares call it 20 million shares. There has been no change in the business other than the share sale and thus the intrinsic value stays at $1 billion.

Target price prior to dilution - $20
Target price after dilution - $14.29


Thus, HGEN will not shoot back up to same prior levels because there are more shares outstanding, unless HGEN is able to increase the intrinsic value to warrant the same $20 share price --- i.e., HGEN would need to increase intrinsic value $400 million to get back to the $20 share price (i.e. $20 share price x 70 million shares = $1.4 billion vs. $20 x 50 million shares = $1.0 billion).